After months of devastating highs at the pump, gas prices have finally smashed a critical, long-standing record. At $3.51 for a gallon of regular gasoline, the national average for fuel has surpassed the 25-year-old inflation adjusted milestone of $3.39. Not since March 1981 has gas cost this much for Americans.
In a new column, Christian Weller, a senior fellow at the Center for American Progress, highlights what millions of people in this country already know — Americans are spending all their money on gas:
In the fourth quarter of 2007, the last period for which data are available, consumers spent 3.8 percent of their after-tax income on gasoline and fuel, up from 3.1 percent in the fourth quarter of 2006. To put this in perspective, over the course of one year, spending on gasoline, oil, and fuels rose by $91.1 billion.
The increase in total consumer spending for gasoline, oil, and fuel from 2001 to 2007 was four times larger than the increase in spending on housing, 88.4 percent of the increase in spending on credit service, and 56.4 percent of the increase in spending for medical care during the same period. The sharp increase in gasoline spending, in absolute terms, due to higher prices adds as much strain on consumer spending as other, much larger spending items.
In a country where nearly 80 percent of the labor force drives to work, the consumer paycheck is being squeezed. As gasoline prices continue to rise, Americans are being thrown into a corner where they can’t borrow, and they can’t rely on savings.
The escape route of credit cards and bank loans is becoming increasingly more closed off, as the mortgage crisis and credit crunch prevent Americans from tapping as freely into the equity in their homes as they once did. Adding to the nightmare, Americans can no longer just dip into their bank accounts because they’ve already used their savings (personal savings rate during the fourth quarter of 2007 fell all the way to zero).