I read an interesting article today that stated a majority of Americans could not afford a surprise expense of $1000 or more.
I wouldn’t be surprised if the number was lower, say a $500 dollar surprise expense. Inflation has pushed living expenses to an almost unsustainable level for lower income earners.
It really is a depressing thought that a majority of people barley earn enough to cover their monthly expenses.
Let’s take a look at the personal savings rate over the last 5 years.
As you can see from the chart above, the personal savings rate is hovering around 3.8%. With fuel prices headed higher, I would not be surprised if this touches the June 2022 low of 2.7% again.
High inflation and high interest rates are the culprits of the below trend savings rate. Things are starting to look a little brighter for the economy in terms of interest rates and credit, high prices are here to stay for the consumer.
Let’s take a look at oil and gas prices by each president since the turn of the millennium.
Oil and gas prices have a huge effect on the world economy, especially on the United States economy since most US citizens are reliant on personal vehicles for transportation.
High oil and gas prices can have both direct and indirect effects on the US economy, impacting various sectors and contributing to changes in consumer behavior, business operations, and government policies. Here are some key effects of high oil and gas prices on the US economy:
Consumer Spending: High oil and gas prices typically lead to increased costs for transportation, heating, and electricity. This can directly impact consumers’ disposable income, as they have to allocate more money to cover essential expenses like fuel for vehicles and home heating. As a result, consumers may cut back on discretionary spending on non-essential goods and services, affecting industries such as retail, travel, and entertainment.
Inflation: Oil and gas are essential inputs in many production processes across various industries. When the prices of these commodities rise, businesses often pass on these increased costs to consumers through higher prices for goods and services. This can contribute to inflationary pressures in the economy, leading to a general rise in the cost of living.
Transportation and Logistics: High oil prices can significantly impact industries that rely heavily on transportation, such as shipping, logistics, and airlines. Increased fuel costs can eat into profit margins for businesses involved in transporting goods and people, leading to higher prices for consumers and potential disruptions in supply chains.
Politics aside, low oil and gas prices are good for the US economy as it gives the consumer more spending power. Part of the reason inflation has been out of control has been due to high energy prices, making it more expensive to transport goods to the consumer.
If US Citizens can unite on anything, it should be low and affordable oil and gas prices because in the end all the excess costs will be inevitably passed onto them.
Whether we like to admit it or not, the world is still dependent on fossil fuels and for good reason: We need them!
The transition to clean energy is well underway, but it will take time, money, and innovation. It will not happen overnight.
Money Fad 