Saturday, May 24, 2008

Gas prices consequences

The first thing I notice is how crowded the bus's are. If you can use a bus to get around it makes more sense then paying for a car, insurance and gas. More and more people are taking their cars off the road. For a lot of people it is a matter of paying for gas or food or rent. The increase in costs due to gas prices is having an impact on every aspect of our lives. People have the same income but now everything costs more.

Car sales are way down, though Hybrid cars are selling more then regular gas cars. There are a lot of sales and promotions trying to get people to buy a regular gas car. With the consistent increases in gas it just does not make any sense to buy a gas car. So to be accurate the cost of everything but gas cars are increasing.

That brings up the second thing I have noticed, retail product cost more, from food to clothing. Sales are dropping simply because you can only stretch a dollar so far then you have to start giving things up. It is not a good time to be in the retail business; even an Internet store like we have is starting to feel the pinch. People have less disposable cash to buy things, and shipping cost is increasing. So even if someone wants an item, shipping may bring the cost beyond what someone is prepared to spend.

As a retailer if I am not making sales, I don't buy new product to sell or manufacture more. I would have to cut costs, such as not selling at festivals because I am unsure if I will make enough sales to break even with the increased rental fees, gas cost, and paying staff. This means I am not employing people I normally would, decreasing their disposable income. It is a viscous circle.

We are on the verge of a recession or even a depression. The cause of this is in part the increased cost of oil, however it is not the only contributor to our economic downturn. We are on the right track by changing to as many alternative fuel sources as possible, changing what we buy and use will decrease our dependence on oil. This will increase our disposable cash, which when spent will stimulate the economy again. All good. But the question is have we made the changes soon enough or are we about to be hit real hard in the next few years with a recession?