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Gas price pain hammers poor

Earl Ofari Hutchinson

There’s nostalgia at the thought of paying $4 for a gallon of gas. In fact, there’s an almost deep longing in paying $5 for a gallon of gas. Those days seem like a thing of the distant past now, with gas prices surging upward past $6.

There’s a multitude of stock reasons offered for the skyrocketing price. Russia’s invasion of Ukraine tops the list. This supposedly sent fear and shock waves through oil producers, refiners and investors, leading them to jump prices and cash in on profits for fear of a global shutdown in oil production and transportation. Price jumps are supposedly a measure to insulate producers from potential revenue losses.

Other reasons cited are transportation and shipping bottlenecks, strains on refining capacity and output, and a post-COVID surge in demand. Then there is the perennial reason: greed.

OPEC is a tight-knit cartel. The dozen or so OPEC members rigidly control oil prices and supply. They can raise or lower prices, raise or cut production, and thus manipulate supply and price, at their discretion.

The problem with the eternal oil price shuffle is that someone must pay. That someone is always the poor and low-income workers. Everything is dependent on petroleum products and their derivatives.

Retailers pay more for items and instantly pass their increased costs on to consumers. A recent Wall Street estimate is that the average working-class family will pay upwards of $2000 more in costs for their needs based solely on the leap in gas prices. If price increases continue, throw that figure out the window and double the cost for average families. And interest rates are poised to rise. Home mortgages, home refinancing, and credit card purchases will be even more costly. The poor and working-class will bear the brunt of that cost rise.

The rich will pay more too. But they can afford it. They need not make a Hobson’s Choice between paying the rent (also continually rising), buying food or putting the extra gallon of gas in their tank. In times past, when inflation hit hard, there was usually a reasonable offset in wage and Social Security increases. Neither has happened this go-round. Yes, there was an inflationary bump up in SSI in 2022. However, that was immediately wiped out with the sharp increase in Medicare costs for SSI recipients.

One false assumption is that many lower-income workers do not own cars, relying instead on public transit. A Brookings Institute study examined households with annual incomes less than $50,000. It found that most of these households own cars. A considerable number of them own multiple vehicles. Even those who rely exclusively on public transit to get to work hardly are immune from the gas price surge. The fuel cost increases eventually show up as hikes in transit fares.

Lots of answers are given for ways to beat back the high fuel price. One is to scrap the old gas guzzler and purchase an electric vehicle. The problem here is the $50,000 to 60,000 price tag is way out of range for low-income workers. EVs hold promise for the future, but that future is still far removed for most of the poor.

California will shell out a few hundred dollars to individuals to help pay for the astronomical state gas taxes. But that’s a one-time offering, and then then when that’s gone, well it’s gone, but gas price hikes aren’t.

Motorists will do what they’ve always done in the face of sharp price hikes — budget more carefully, buy less where possible, cut corners wherever they can on purchases. The federal and state governments can help by providing unemployment insurance benefits, payroll tax cuts or other assistance to lower-income households. Unfortunately, the harsh reality will remain — gas price pain, as always, will hurt the poor more.

Earl Ofari Hutchinson is an author and political analyst.