75 comments on OPEC says pumping more won't bring oil price down
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75 comments on OPEC says pumping more won't bring oil price down
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GAIA Host Collective
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.
Interesting stats. Lets take someone earning $15k and drives 30 miles each way. The average one way commute is 25 minutes. I'm guessing that it represents 10% of the population based on the graph. Take home pay is $1062 - rent(500) - insurance (75) - food (300) leaving $187 to pay for gas. If he uses an average car (25mpg) that means 48 gallons. The pain threshold is $187/48=$3.90 per gallon (crude $130).
Not far from my original estimate of $4.10, except that now we are talking about 10% of the population instead of a worst case.
If this person moves closer and commutes 10 miles each way (without paying a higher rent), they will save $130 per month with $3.90 gas. If they need to pay a higher rent, we may see more car campers or uninsured drivers.
Interesting analysis.
However, I believe the pain threshold is even lower. Car maintenance, for example, is a real cost and expensive. So even ignoring the likelihood of a monthly payment on a vehicle loan, a monthly value for maintenance would lower the pain threshold. If the maintenance is cheap, say $25/mo, then the PT is knocked down to $162/48, or $3.38 per gallon.
Sixty miles a day seems high. I believe it's more like 45 miles for the average commuter (DOE stats). This would put the PT back up to 3.38/(45/60) = $4.50/gal. However other costs are likely higher. Shows how sensitive this calculation is to a myriad variables. It would be interesting to see a more detailed accounting.
-best,
graywulffe in CVO, OR