Analysts Say High Gas Prices Could Slow Recovery

We're still a long way from the nearly $4 a gallon gasoline prices we saw in the summer of 2008, but experts say $3 gas might stick around for a while. It could also put a damper on the economic recovery if consumers are pumping more of their discretionary incomes into their gas tanks. Tom Haywood is an editor with the Energy Intelligence Group here in Houston.

"When you consider that we're a consumer-driven economy,then that money is being sucked-up where it could have gone to Wal-Mart,  it could have gone to the grocery story, it could have gone to a restaurant. It's being sucked in to the gas tank for no more than what's already there. You're going to buy that gas anyway. It's just taking a larger cut of the expendable income."  

Two or three years ago, $4 gas nearly killed the SUV industry as motorists chose more fuel friendly vehicles.
Now, many of those same people have big trucks and SUV's again and might start remembering the $100 fill-ups of a few years ago.

"They'll do what they can. They'll dump their big cars. I knew people who got rid of their big trucks. Well, I know those same people have bought new trucks. So, did they learn a lesson? No. There wasn't really a lesson to learn as much as people have very short memories in this world. They get in the positions over and over again."

Because fuel costs affect most aspects of commerce, higher prices will mean higher costs for other goods and services as well. That's according to Houston energy analyst Alan Lammey, who says consumers will pay for more than just higher gas prices.

"Every business has its margins that they have to maintain in order to stay in business and employ people and as their costs increase through having to pay more for more fuel to ship goods and manufacture goods and everything that energy is used for these days to create our lifestyles and bring us all the products that we need, the increased burden that is has on the economy goes many, many layers deep." 

Lammey says that could put some stress on the already shaky economic recovery, when people can't spend their money on things that aren't necessities. But he says because we're in Houston, higher gasoline prices aren't all bad.

"Are we seeing a situation where you're going to be seeing bolstered revenue and such within the Houston economy? Yes, without a doubt. That will definitely be a benefit, particularly to us in our neck of the words compared to other areas of the country." 

He says if prices reach the $4 level, expect consumers to push back and begin carpooling and cutting back on unnecessary trips again.

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