Gas prices are officially up $1 in one year, if anyone cares. The AAA Daily Fuel Gauge Reports shows that a gallon of regular gas cost $2.854 a year ago, and $3.863 yesterday. Maybe the number is psychologically important, like $4 gas will be. Maybe it is more important to people that the percentage increase over the year is 35%.
People will have less discretionary income because of gas prices. It is shocking that some economists think prices have not gone high enough to hurt GDP growth. Perhaps these experts could share their forecast models which proves that point. Or, they may be reluctant to show mathematics that makes no sense.
There is actually one argument to be made about a positive effect of gas prices, if people can afford to drive to work: All tourism will become local. Economies in areas which do not usually benefit from visitors may find that travelers have to stay near home to have fun. Local restaurants and shopping centers may finally get the summer surge that they have hopelessly dreamed of for years.
It is too early to tell whether gas prices will hurt the economies where tourists go in the summer and help those areas that tourist usually leave. Maybe the two will balance out and the theory that high gas prices will not undermine the economy is accurate.
But, tourists many not even leave their backyards. They may just turn on their air conditioners and stay at home.
Douglas A. McIntyre
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