Think Oil Prices Hurt Now? Just Wait...

[Purveyor]

DALLAS, Texas (Reuters) - Sky-high oil prices are causing pain at the pump, but bills for air conditioning this summer and heating next winter -- combined with rising food costs -- promise to squeeze U.S. consumers even more.

With gas at $4.00 a gallon, households already have less to spend on a new grill at Home Depot; a vacation at Walt Disney's Disney World; a new TV from Best Buy Co; or a new "hog" from Harley-Davidson Co.

And there are no signs things will get better soon for the consumer, long the driving force of U.S. economic growth.

"For the areas of the economy that rely on heating oil, high fuel prices are going to be another blow to the consumer this winter," said Jack Kyser, chief economist at the LA County Economic Development Corp.

"The hotter states will feel the pinch during the summer months but in the mid-America states where you get hot summers and cold winters, it's going to be very uncomfortable," he said.

"This is going to eat into the disposable income of American consumers -- supposing they have any left."

--
HARD TIMES

This could become an especially depressing reality in July and August, when back-to-school shopping starts, and in November, when holiday shopping gets under way.

Without strong sales during both of those shopping seasons, retailers including Wal-Mart, Target, J.C. Penney and Sears could post bleak results for the last two quarters of 2008 and the first quarter of 2009.

For many years, the consumer has been the engine of U.S. growth, accounting for around 70 percent of the economy.

But much recent spending has been done on credit, leaving Americans with a negative savings rate.

Now that consumers have been hit by the double-whammy of a weak economy and higher costs, the question is how much damage the engine has sustained and how long it will take to fix it.

MORE: http://www.reuters.com/article/newsOne/idUSN2248967220080522

[LynzM]

1. I'm of two minds on this...

1. Oh my gosh, you mean we'll all have to cut back on consumption, and find ways to reuse or do without? *gasp!* GOOD.

2. This really sucks for those who are already struggling or finding it impossible just to feed their families. They don't have a disposable income cushion at all to make alternate choices with.

[Hydra]

3. #2 category

My disabled relative and I were just squeaking by with gov't help before this. Now the gov't help is drying up...

[liberal N proud]

4. The thing about that struggling point

Some who were not struggling are now and as prices soar, more will join their ranks.

I am just waiting for that struggling feeling to return, I have been there before.

It is kind of like getting knocked down by the bully and every time you try to get up he sucker punches you again.

On Edit:

Point 1 is one trying to act like they care for the planet. Well, there are better ways to achieve that then cripple the world.

[hendo]

8. It won't cripple the world

if people re-use what they already have. It won't be that great for the economy, thats for sure, but the economy is bloated as it is.

[Individualist]

21. Food and medicine can't be re-used

[tama]

26. Sure they can be

Compost toilet instead energy sink.
Growing medicine in garden (fertilized with compost toilet) instead of chemically manufacturing.

[Wilber_Stool]

5. To all of the candidates.

Do you have any plans for massive unemployment and the civil unrest it is likely to cause?

Oops, clicked the wrong reply.

[grasswire]

13. I wish you would start a separate thread asking that question.

Because you know they have already been briefed, and they are informed about the plans for the unrest.

They have seen the doomsday scenarios and the plans spelled out.

So they need to talk to the American people about this stuff. And Americans need to be demanding information.

[Wilber_Stool]

18. Would I have to start it in

GD:P? I'm afraid to go in there.

[Missy Vixen]

15. Please start an individual thread with this question

I had a chilling conversation recently with a friend in law enforcement. I joked about our home security system. We live in a very low-crime area. It's estimated that it takes roughly two minutes for police response.

He told me to make sure the system is working and functional, and that we use it. He said, "I can't guarantee the crime rate will stay as low anymore."

Julie

[iamjoy]

10. If Only It Were That Easy

So, if Americans cut back on their spending, that means they go shopping less. Sounds like a good thing, right?

What about the person employed in the retail sector? If the retail sector starts laying off people, how are those poor folks supposed to pay their bills and feed their families? They won't be able to get new work in the hospitality industry, restaurant business or transportation sector - with people traveling less, those areas too are having to make cut backs.

About the only industries that will be hiring are hospitals and collection agencies.

We're in a fine mess, aren't we?

[LynzM]

14. I know, you hit the nail on the head

Our economy and many (most?) of our livelihoods are so consumption-based at this point, that if people are forced to cut back, or choose to, that puts even more people in a situation where they can't make enough money to get back.

There is enough available man-power to make enough food, build enough buildings, weave enough cloth... but our society is not structured in a way that allows someone to contribute the *needed* 8-10 hours a week in exchange for a place to live, food to eat, clothes to wear. It really sucks, and other than communal, barter-based living, I don't know what any kind of solution would look like.

[tama]

27. Lot of manual labor

needed on fields and gardens as technofarming with oil becomes too expensive.

Oh, but weren't the Mexicans supposed to do that, not real Americans?

[Hydra]

2. Economy grinding to a halt

Deliberately created disaster...and people even here said that they would dare.

They can and they did.

[no_hypocrisy]

12. This economy was based on consumer spending.

So much that easy credit was created to allow consumers to spend when they didn't have enough money to spend.

Now, with a majority of salaried workers earning less than they did 10 years ago, leveraged to the hilt, here are their realities:

1. They can't borrow as much as they used to or at all. Cash rules.
2. Less cash out there to spend.
3. New spending priorities begin with necessities like mortgage, utilities, food, transportation.
4. And since a larger ratio of money goes to transportation (and indirectly to other necessities whose costs are dependent upon the price of transportation), less money goes to non-necessities. And these non-necessities are the things that fueled the economy. Vacations, super-sized vehicles, McMansions, Whole Foods, take-out on a regular basis, wide-screen plasma TV's, etc. There is no more money.
5. Markedly less consumers means the economy eventually but dramatically slowing down as there is not another model in place to substitute for consumerism to keep it going smoothly. There will be sporadic contractions. Personal lifestyles will be alterred. There will be two classes: monied and non.

[Deja Q]

32. And offshoring.

[hendo]

6. It will only get worse before (if) it gets better

Americans love thier credit cards too much.
One simple rule for spending: If you don't have the money, don't f*cking spend it!

If everyone would stop spending money they dont have, stop trying to buy things they can't afford, and learning to reuse/fix what they already own, they would be a lot better off, and the landfills would contain far less trash.

[Indiana_Dem]

17. The hard thing about reusing/fixing something is that most of it is made of cheap crap from China,

and in order to sustain/maximize economic growth, manufacturers create things that aren't made to last more than 2-5 years as opposed to things made long ago here in the U.S. in the first half of industrialization. I heard a clothes washer is not made to last more than 10 years nor are the new TVs being made to last longer than 5-10 years, for example.

[hendo]

20. planned obsolescence

Yes, it is a problem.

[Xenotime]

28. Credit was made for the little man so that he thought he was rich.

[postulater]

7. Small businesses that rely on direct consumer spending

are already getting hurt badly. From there it just snowballs.

[hendo]

9. And the reason for this is

that everyone is directing their money toward the low cost Wal-marts and away from small businesses. Americans have their priorities way out of whack.

[Missy Vixen]

16. Let's see here

People should "reduce, reuse and recycle" and "not buy shit they can't afford", but small businesses should stay open by magic?

You don't get it. I don't advocate that anyone goes into debt or shops as a means of passing time. At the same time, when consumers are so strapped that they're not buying ANYTHING discretionary, the economy comes to a halt.

I owned a small business. I saw the handwriting on the wall almost two years ago, because the bottom dropped out of the industry I was in. People could get what I was selling for less money at Wal-Mart. No matter how much they might like you or think you do a great job, they're going to go where it's cheaper. Right now, that's all people can focus on -- getting stuff for less money, because all of their money is going into debt service, medical/prescription bills, and the gas tank. This winter is going to be even more bleak as people spend what little discretionary funds they have on keeping their homes somewhat heated.

In a climate like this, small businesses fail, and fail rapidly. Those folks don't have money to spend, so the people they were spending it with fail, too. The only people that can survive something like this are the Wal-Marts and other large retailers that can weather what looks like a hellacious storm.

IMHO, YMMV
Julie

[hendo]

19. If Americans had thier priorities straight

they would shop at small, local stores. They would realize that it is more important to keep thier money in thier communities. If they spend all thier money at Wal-mart, thier money is going out of state, and in the case of Wal-mart, going overseas.

Americans need to spend thier money locally first in order to help prop up thier local economies.

[mach2]

22. Not to defend WalMart but a lot of people in my small town would be jobless

if it weren't for them. Solutions aren't always (or even often) simple.

[hendo]

23. yes

it is true that a lot of people would be jobless without Wal-mart, and yes Wal-mart can and will change the way most americans think of organic foods. However, there are ways to support local businesses without putting the big ones out of business. Although, I highly doubt that Wal-mart will go out of business any time soon.

[mach2]

25. There's just so much we can do, really. WM is the only grocery store in my half of the county.

I can drive to other stores...but at a minimum of 66 mile round-trip and with gas at nearly $4, well...it's a dilemma.
:shrug:

[hendo]

33. there aren't other grocery stores, or farmers markets or anything

within 30 miles? damn. I didn't realize that Wal-mart had a monopoly in your area, Tulsa, right?

[tama]

29. Yes

Often solutions are too simple to see.

[AmandaRuth]

11. worse, it is going to get worse

check this out.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=367x11178

[uppityperson]

24. This BULLSHIT really pisses me off.

"With gas at $4.00 a gallon, households already have less to spend on a new grill at Home Depot; a vacation at Walt Disney's Disney World; a new TV from Best Buy Co; or a new "hog" from Harley-Davidson Co."

JCOATH, I am tired of this sort of shit, along with the attitude that the problem is people just drive too much.

I have NEVER bought a new grill, a new tv or a new "hog". Ever.

And while I do probably drive more than I absolutely need to, that is NOT my problem, or that of most people I know. A problem is basic food costs are going up fast and we are cutting back on fresh veg/fruits. A problem is people are being squeezed so they can't meet their health insurance deductible (those fortunate enough to have health insurance) so they are not getting the health care they need, from me, and my income has dropped way off due to this. Another problem is those without health care have definitely been cutting back on health care. They spend less on me, I have less to spend on them. Around and around and around.

I get sooooooooooooooo tired of those who say or think that we just need to cut back on major appliances, on NEW things. That is what those who are rich enough to afford them need to do. Some of those people are ones who yes, will suffer, but they are in the minority.

argh. Rant over.

I agree with the article, aside from that nitpicking point.

[marmar]

30. We can either suck it up, bear the pain, and accept that the cheap oil economy is gone for good.....

..... or stubbornly try to cling to this unsustainable mindless consumption-based economy, and end in ruin.

We are at the proverbial fork in the road.

:think:

[Initech]

31. Fuck this shit. I'm tired of this crap.

All this speculation is really getting under my skin. I'm tired of all the bullshit energy companies squeezing every last dollar and dime they can from us. All repercussions of electing this fucking piece of shit we have in the White House.