You forgot car insurance and beer.

Having lived poor you tend to have the 10 bucks or so for a cheap 12 pack once a week no matter what. Plus incidental expenses. On the plus side a bit of overtime or double shifts or another part-time job helps a lot. You want to drive some on the weekends also.

I think your looking at much over 3 bucks a gallon becoming a real issue even if you have a 40 mile commute.
40*2*20/22 = 72

but lets assume you only get 15mgp say own a truck.

40*2*20/15 = 106

Or lets add a common expense say a small car payment.

You can see that these people are right on the edge much above 2 dollars a gallon which is right now.

Next your making a mistake that how much you earn determines your disposable income a lot of people make more than minimum wage but have the extra money eaten up in home/care expenses.

So say you earned a take home of 2000 a month or 24000 a year take home or 30k or so before taxes. Your rent/house payment is probably closer to 800 or 1000 and you would have and additional car payment say 100-150 a month.

You can see that on the disposable income side your not really insulated against higher gas prices until your income moves into the 40-60k range if your reasonable with your expenses.

Next of course your not factoring increased secondary costs for food etc as they pass on higher transportation costs.

Of course a lot of people in the above ranges will continue to buy gasoline they will just cut out expenses say eating out for lunch which causes some guy making minimum wage lose his job.

As you can see owing and operating a car is a tenuous capability for most people below 30k a year.
My own experience being poor was that this was the case you sacrificed quite a bit to get a car and more to drive it any distance. This was well before sky high gas prices.

This means of course that consumption of other goods and services outside of the basics will drop of fairly quickly for the population below the 30k mark as gasoline prices increase.

http://www.heritage.org/Research/Economy/wm1186.cfm

This give 5% of the population making the minimum wage.
I found a stat of 15% of the population below poverty.
Lets guess that its 30% are twice the poverty level you can find the exact stats.
http://en.wikipedia.org/wiki/Household_income_in_the_United_States

You can see from this graph 40-50% of the population falls into this at risk category of people who can barely afford a home car and additional expenses. The reason is people will tend to expend extra money on both cars and housing so they stay fairly close to the edge in the US.

Even if this group can afford higher gasoline costs it seems obvious that it will eliminate a lot of their disposable income cutting their additional purchasing power close to zero. The American consumer at the low end is close to extinction. I'd simply watch Wal-Mart earnings.

Less than 30% of the population in the US can absorb high fuel costs and obviously this percentage would drop if the lower half stops spending.

I don't think the US can really even handle 2+ a gallon long term. We are probably already above the gas price level needed to cause a consumer led recession. The housing bubble and easy consumer credit is probably the only thing that kept us going.

Congrats, you're on the right lines.

Its not the absolute levels, its the disposable income and the change that create pain and thus demand destruction. I'd suggest that many of the poor in the US are actually closer to the edge than you calculate, something closer to the $20 left level.

The other factors are:
- taxation level on petrol
- government subsidies
- average vehicle mileage
- average miles driven
- speed of change in price
- total country consumption number

If you put these together and make some assumptions for the values in countries worldwide then you can can rank groups and countries by who will feel pain in what order. You can also say at what oil price that pain kicks in.

This is why I've previously suggested that the US is going to be an early victim of oil prices:
- its low tax level means in percentage terms the hit will be larger than high tax level countries
- no subsidies or caps
- low fuel economy of vehicles
- high mileages of vehicles
- high country percentage use
- and add to that a currency that's going steadily down.

When you rank the countries and those that have already suffered demand destruction, that makes the US the next 'plateau' level. Prices will rise until sizable numbers of the US poor start getting hit. It will then stagnate as the demand destruction gradually eats through the large consumption numbers of the US poor. That will have a sizable impact on the way of life in the US, even if the poor there are generally ignored.

At rough calcs that happens around the $110 level, although the very strange crack spread numbers is putting that off at the moment.

I think it was Norman Tebbit (UK Right Wing Politician) who in the 1980s said regarding looking for work:

"GET ON YOUR BIKE!!"

-the advantage of this is two fold:

1. No gas to pay
2. It makes you fitter (something a lot of Americans should seriously consider regardless)

The thought that civilisation will collapse if Joe 6 pack cannot afford to fill his 15mpg 1980s gas hog is nonsense. Get over it.

Nick.

Sorry, realist. 60 mile one way commute distance for a min wage job? I think that is an unreasonable assumption. The only way people will keep a job under those conditions is if they REALLY love the work...(they would also have to REALLY love the location they live in.) Please give me an example of a minimum wage job that people love so much they are willing to commute two hours each day, in concert with a location that demands a 60 mile commute.

For example: Living on the beach in Cocoa Beach and commuting 60 miles to Disney World to walk around as Goofy....hey wait a minute, that was too good of an example. Except your rent is now 3000 a month.

The first thing that will happen, under those assumptions, is a switch in jobs within walking distance.

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