Soaring gas prices take economic toll
www.signonsandiego.com By Frank Green UNION-TRIBUNE STAFF WRITER March 18, 2003
San Diego County motorists could spend an extra $600 million or more on gasoline this year if fuel prices remain at record-high levels, according to estimates by local economists and consumer activists.
The potentially huge chunk of displaced cash could spark symptoms of stagflation by pushing up the cost of most consumer goods even as workers' earning power stagnates, as happened when oil prices spiked in the 1970s.
"Every 10-cent increase in fuel prices translates to roughly $5 million a month" transferred to refiners' coffers, said University of San Diego economist Alan Gin.
Gin generated the $600 million estimate based on gasoline sales and vehicle use in the area.
The average cost of a gallon of unleaded regular in the county jumped to $2.22 yesterday, up more than seven cents from a week ago, according to a survey of 550 local service stations by the Utility Consumers' Action Network.
Prices ranged yesterday from $2.09 a gallon at some Arco and Costco outlets to $3.79 a gallon at a Texaco station in El Cajon. Gas cost about $1.40 a gallon this time last year.
Nationwide, fuel prices rose to an all-time high of $1.72 on Friday, the American Automobile Association said.
Fears of a war in Iraq, among other factors, have caused crude oil inventories to drop and prices to soar. In California, prices have been pushed up even more as refiners switch to the new fuel additive ethanol.
A typical family in the county paid $1,349 for gas and oil last year, according to the Bureau of Labor Statistics. Thus, a 50 percent hike in fuel costs would mean an extra $674 deducted from the family budget.
"That's a very steep jump," said Kelly Cunningham, an economist at the San Diego Regional Chamber of Commerce. "Consumers have already been getting conservative about spending (because of the impending war against Iraq) and this is another damper."
Gin noted that the $600 million in possible additional fuel costs for the county this year is just a fraction of the area's $100 billion-plus economy.
It is also smaller than the $2 billion in higher bills paid by local ratepayers to electricity generators during the energy crisis of the last two years.
But critics of the oil industry note that $600 million would be enough to cover more than half of the San Diego City Schools system's $1.1 billion budget.
Some consumer activists said yesterday that Gin's estimate may be conservative and that local car owners could have to pay much more for gas if there is a prolonged war against Iraq.
The $600 million figure "seems low," said Charles Langley, the manager of UCAN's gasoline project.
UCAN said it has been inundated with calls and e-mails from members worried that their budgets will be stretched to the breaking point by spiraling fuel costs.
One member lamented that he may have to sell his truck or get a third job to pay his gas expenses.
"I get 12-15 miles a gallon," he wrote in an e-mail to the nonprofit organization. "That's about 13 to 18 cents a mile. I know public transportation is an option, but I like driving and don't want to lose it."
Gin said he expects the first casualties of higher fuel costs to be discretionary items – things like concert tickets and ice cream cones – as consumers spend more on a must-have commodity.
But the price spike will ultimately exert a ripple effect on the economy, as furniture, pizza and other goods cost more to be transported, Gin said.
Gasoline for April delivery rose 1.21 cents, or 1.2 percent, to $1.0525 a gallon in overnight electronic trading yesterday on the New York Mercantile Exchange.
Futures, which represent wholesale markets, dictate the direction of retail prices.
Gasoline futures are up 54 percent since November, having begun to rally in December with the start of the strike in Venezuela, which had been meeting 10 percent of U.S. oil needs.
They touched a 21-month high earlier this month.
Oil and gasoline futures rose yesterday on the expectation an invasion of Iraq could begin as soon as this week, after the United States and its allies said the United Nations has one day to break its deadlock over the use of force in the Persian Gulf, source of a quarter of the world's oil.
Some government officials are suspicious that the oil industry may also be manipulating the gas supply for profit.
Last week, Sen. Barbara Boxer, D-Calif., asked the General Accounting Office to look into allegations that oil companies are shutting down more refineries than usual this season with the possible intention of boosting prices.
Frank Green: (619) 293-1233; frank.green@uniontrib.com