The Oil Drum

I've said it before. It's a bit silly to look for a Magic Round Number, the world is far too diverse for that. Your computer consultant no doubt dislikes the pay cut, but with a wage of $35/hour, gasoline at $20/gallon, maybe even $40, would likely be preferable to no gasoline and no job, or only a minimum-wage job at the corner convenience store. Actually, my crystal ball goes fully opaque long before that kind of price is reached, making it really a bit pointless to speculate what the world would look like by the time your consultant was priced out of the gasoline market.

What is far more likely to ruin your consultant is a rationing scheme introduced by demagoguing politicians, which might well make your consultant unable to work, as he/she probably has to drive a lot. This is an important point that people who demand price controls choose to forget - if they can't get the gasoline, many of them will be earning close to $0/hour. Then again, under rationing, people would become outlaws and pay whatever it took: in the USA at the end of World War II - that time of supposed patriotic solidarity that foolish old folks like to reminisce about so gushingly and dishonestly - half of all the gasoline was sold under the table.

Now, at very low wages it's trickier. But there's still no hard, fast, bright line if the alternative is earning $0/hour. On the other hand, in populated areas, there's a minimum-wage job or three on practically every corner, and those jobs turn over many times a year. So it's usually not truly necessary to drive a long way. Indeed, the real problem might not be gasoline, so much as the existence of the job itself. Would demand hold up for the often outrageously overpriced - and therefore rather discretionary - goods and services typically provided by those corner businesses?

If you are paying an extra $20 to $30 a week for gas means $20 to $30 less for other things. Getting back and forth to work and for essential shopping is a high priority for most families. Easier to skip going to the movies than skip going to the gas station. Purchases for durable goods can be delayed until either prices drop or income rises. And durable goods purchases have gone down.

I have a sailboat on lake Erie. Most of the power boats in the area I sail are the larger cabin cruisers. These boats use lots and lots of fuel. The boat that was in the slip beside me last year had a 400L fuel tank I believe. My sail boat only has a small outboard motor. That's enough to get me in and out of the marina. What I have noticed was last year and the end of 2005 their was fewer power boats out on the water. Most of them just kept them tied up in the marina. Actually it was kind of nice, less noise, less large wakes, and less trafic in and out of the marina.