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Study says state residents spending $171 more per month on gas
Grace Leong
Most people see red when they think of gasoline prices these days. And with good reason.
The average Utahn is spending $171 more per month on gas this year, up 57 percent from 2005, according to a Wells Fargo study released Thursday. That's not surprising, given that gasoline prices in Utah -- now nearing the $4-a-gallon mark in most areas -- have jumped 21 percent since last year, and are up more than 76 percent since May 2005, the study said.
Fueling the rise in crude oil and gas prices is demand from the emerging nations of China and India, both of which enjoy government subsidies on fuel, as well as speculators betting on higher commodity prices as a hedge against a weak dollar.
The study found that a typical Utah family now spends about 5.9 percent of their real income (or income adjusted for inflation) -- which equates to $5,655 a year or $471 a month -- on gasoline costs. That compares with 4.3 percent of real income spent on gas costs -- which equates to $3,596 a year or $300 a month -- in 2005, said Kelly Matthews, executive vice president and senior economist with Wells Fargo in Salt Lake City.
"The question is: Can we afford what we're paying for gas?" Matthews asked. "In only three years, we've gone from paying for very affordable gas to what is now a very expensive economic pain, and in a very real sense, unaffordable for many budgets.
"What we've found is, the incremental increase in gas costs now far exceeds a typical Utah family's discretionary savings, or their ability to absorb those additional costs. Something has to give. Either they drive less, work more to get more income, change cars, eat out less or stop spending in other areas. But the point is, adjustments now have to be made," he said.
"Yet keep in mind that the situation might possibly be even worse than the numbers indicate," Matthews said. "These figures don't take into account that 13 percent of personal income, on a national average, goes to taxes. That means the amount of personal disposable income would be smaller, and that would make the impact of gas prices more difficult to manage."
Slower consumer spending could ultimately accelerate the slowdown in Utah's economy, he said.
"The magnitude of the slowdown in Utah's job growth depends in part on how soon and how fast oil and gas prices bite consumers. If consumers cut back significantly, businesses are going to have to adjust their employment, or lay off people, just like what is now happening in the mortgage and airlines industries," Matthews said.
"Obviously we don't want that to happen in Utah's economy. For now, it looks like we'll continue to slow down through the remainder of the year, but we're not likely to drop below 1 percent in job growth, which should be better than the last recession in 2001-2002," he said.
Yet, with gas prices near $4 levels, Matthews sees the possibility of more resources being invested in the development of alternative sources of energy to help reduce America's dependence on foreign crude oil imports.
"What will it take for us to get serious about moving toward alternative energy fuels? It's great for the economy if gas prices come down. But if prices do come down, it may slow a serious conversion to alternative sources of energy," he said. |
