For those of you wondering when/if we are going to see the effects of the current recession and the skyrocketing price of gasoline, it's happening already. Let me tell you a story...
While shadowing today I talked at length with a patient who owns a restaurant. Or I should say currently owns a restaurant, because the future of this small business is in doubt. After over two decades of friendly service, this cozy haven is perilously close to shutting its doors.
When I asked the owner what he blamed for his misfortune he had one simple answer: gas prices. Apparently this man is extremely fastidious with his bookkeeping and can trace the slow decline of his profits as they juxtapose the ever swelling price of gasoline. He explained to me that he recently looked at his records and saw a startling correlation between the cost of gas and his customer base.
According to him, a little over three years ago (2005) the price of gas jumped from ~$2.30/gal to ~$2.90/gal (a 26% increase). After this spike, he saw business at his restaurant drop off by 30%. Well, although the loss was tough he kept trucking ahead. Then gas jumped again, from ~$3.00/gal to the current price of ~$3.35/gal (a 12% increase). Again, he saw business plummet by another 30%. He is now clinging to what little income he is drawing from the restaurant and will likely shut the doors permanently soon.
And gas isn't the only reason people are going out less. There is simply less expendable income for the average person. With rising inflation, the average American budget just doesn't have enough pocket money to go out anymore.
Picture a young newlywed couple. In previous decades they would usually have $20-60 to spend on the weekends (dinner, movie, drinks). Now this money goes to fill a gas tank. And that amount of money couldn't even buy dinner and a movie these days to begin with ($9.00 for a single movie ticket?!?! I'll borrow my buddy's pirated copy, thanks).
And this brings up the issue of previous recessions. "But, but, but, recessions have occured in the past! Look at the early 2000s after the dot-com burst! We recovered from that because of Dubya! Yee-Haw!"
Don't count on that this time. We recovered from previous recessions because we still wielded unparalleled power on the world economic stage. No longer. Where previously we were the biggest oil market in town (and so saturated in cheap oil we might as well have bathed in it) now we are in direct competition with the Big Red Dragon - China. Now, China hasn't yet reached the absurd amounts of consumption we are accustomed to, but they will if given opportunity. This means that when the big swinging dicks of OPEC are looking to shill out their black gold, they can now go with the highest bidder where there was previously only one buyer in the market (US).
So what does this mean in the long run? Well don't expect gas prices to go down, that's for sure. And those days of long car trips, affordable SUVs, and earth-rumbling RV homes are dwindling into the history books. Expect to be living by much more meager means in the future. I'm not saying it's going to be tomorrow, but just know that powers are shifting. And if you think the Middle East and China are significant powers today, well.....
