Washington, D.C. – This coming Memorial Day weekend kicks off the summer driving season across our nation, and newspapers and news shows across the country are reporting what millions of Americans already know—gas prices are on the rise again. Prices at the pump rose a whopping 32 percent in inflation-adjusted terms between December 2006 and mid-May of this year—just as the summer driving season is about to kick off. And as a new Center for American Progress report shows, the rise in gas prices is negatively affecting family budgets.
“Gas prices put family finances on a rollercoaster ride,” said Christian E. Weller, CAP Senior Fellow and co-author of the report “Pain in the Gas: Volatile Gasoline Prices Wreak Havoc on Household Finances.” “This makes it hard to plan for other expenditures and even harder to put money away for larger items, such as a new car or their kids’ education. We always think that Wall Street has severe ups and downs. It turns out that since 2001, gas prices had more severe ups and downs than stock prices.”
This new report considers the consequences for commuters and vacationers who calculated their monthly spending this year on average gasoline prices of $2.31 per gallon at the end of 2006. By May of this year, average prices were $3.10 per gallon, which means the average commuter has only 75 percent of the money budgeted to get to and from work each month. Should prices at the pump reach $3.50 per gallon, this commuter will have only 65 percent of the cost of commuting covered. At $4.00 per gallon, the average commuter will have set aside only 55 percent of the cost of going to work each month.
For American families planning their annual summer vacation, the consequences are even more evident. At today’s average price of $3.10 a gallon, a family traveling from New York City to the Outer Banks of North Carolina for a week at the beach would run out of gas in the Chesapeake Bay Bridge tunnel if the only cash on hand for gasoline was what they had budgeted for at the beginning of year, when gas prices were at $2.31 a gallon. At $3.50 per gallon this family would barely cross the border between Maryland and Virginia on the Eastern Shore before running out of gas money near Keller, Virginia. At $4.00 per gallon, this family would be spending their vacation in St. James, Maryland—179 miles short of their destination.
Gas prices aren’t the only thing sky-rocketing. During the same period that gas prices have increased, oil companies have received record profits. Noted CAP Senior Fellow Daniel J. Weiss, “High gas prices transfer income from American families to big oil companies already swollen with profits from previous price spikes.”
Rising yet volatile prices at the pump leave Americans today paying more for gas than at any time in the past quarter-century—and leaving families unable to accurately plan their weekly, monthly, and yearly expenditures. As commutes and other drives remain fairly constant, families have to adjust to large price swings at the gas station by buying fewer other items or by dipping into their savings. More stable gasoline prices would make it easier for families to plan their daily lives and expenditures, maintain savings, and likely contribute to more economic security.
Please also take a look at our video, “Pain in the Gas: By the Numbers” on the report webpage.