Suffering with gas prices

Date posted: April 27, 2011

There are some things most of us have to buy, and there are others we can take or leave. Gas fits into the first category. What does this mean in terms of which households suffer the most when gas prices rise? N.C. State University economist Mike Walden responds.

“Well … in economics lingo we call gas a necessity. It is something that most of us have to buy regardless of price. Over time, perhaps, we can vary how much gas we use if we buy a more fuel efficient vehicle or if we move closer to our place of work or if we carpool. But in the short run, when gas prices go up, most of us have to grin and bare it.

“Now in terms of who suffers the most, unfortunately this is one of those situations where it looks like people with limited resources, lower incomes, suffer the most.

“Number one, many lower income people live farther from their place of work, the reason being that rents and land prices and home prices tend to be lower the farther out, for example, into a rural area or undeveloped area that you live. So oftentimes low income folks have a greater commute. And that means they are going to spend more on gas.

“And indeed the latest data that we have show the lowest of our income households spend about 10 percent of their income on energy, which a great part of that includes gas, whereas for high income households, those households spend only 4 percent of their income on energy, again including gas. And also low income households … often don’t have the ability quickly to switch vehicles. They just don’t have the resources to buy more fuel efficient vehicles, and sometimes they are not even in the area where public transportation serves.

“So again this is one of those aspects of our economy where sometimes those with the least get hit the most.”

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