Our $490 Billion Gasoline Bill

By the end of 2011, Americans will have spent more than $490 billion on gasoline--more than we spent any other year, even though we've reduced the amount of fuel we use since 2008. This is a terrific outlay of money--almost equivalent to the trade deficit--but it impacts the US economy at an intimate household level. Household by household, the rising cost of gasoline took chunks out of budgets across the US, as you can see in the map above. But where you lived determined how much you paid. New Yorkers' monthly bills rose an extra $64 to $252 while Texans needed an extra $90 to make their monthly total of $451. All of these increments add up: By the end of 2011, we will have spent an extra $100 billion more on gas than we did in 2010. Our gas tanks basically wiped out the entire middle class tax break that was supposed to stimulate the economy and create jobs.

Families are struggling to find the money to pay for gas even as the US experiences its third year of declining incomes. Obviously, gas costs play a role in increasing prices and depressing employment, but the slump itself is also forcing some households to buy more gasoline. Darren Flenoy, the security guard whose video appears on the home page, made a good salary as a security guard, saved his money and bought a home that he could afford in the far suburbs of the Bay Area in 2006. Inspired by a $6000 rebate that appeared to offset rising gas prices, he bought an SUV. Both of these decisions were mainstream economic choices at the time. But when Darren lost his full time job and got two part-time jobs, he found himself driving much further--seven days a week--for a far shorter hours and a lower salary. Suddenly he was spending about half of his salary simply to go to work. This amount seems inconceivable, but Darren feels he has no choices. Unable to change his mortgage, his job, or his vehicle, and without access to public transit, he is trapped paying the going price for gas. Whatever it is.

What does an anecdotal experience like Darren's mean for the US economy as a whole? And how can policy makers better understand the depth and dimensions of the energy trap to give workers more choices than simply gritting their teeth and paying at the pump?

This report is an attempt to combine interviews with data to quantify the Energy Trap. Using scores of interviews with people across the country, we've tried to understand how people think about the tradeoffs they make to pay for gas. To better understand how consumers' reactions to recent gas price increases relate to historic ones, economist Skip Laitner has written a working paper on the conundrum of price and income demand elasticities. To move beyond the anecdotal, sociologist Karen L. Ehrhardt-Martinez surveyed 2000 households on their spending and decision-making around cars, gas, and transportation in general. This report is presented as a series of stories told by data together with personal stories from people we interviewed. We'd like to start a discussion on how to better study and understand the Energy Trap both for families and for the economy as a whole. Also, we'd like to start the search for policies that could act as "keys" to unlock the trap, allowing Americans to reduce gasoline spending, and choose how they spend their incomes.

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