May 24, 2007

The Impact of High Fuel Prices on the American Economy and Businesses

The Democratic Policy Committee (DPC) has released a document detailing the impact of high fuel process on the American economy and business. Gasoline prices broke records nationally and in 20 states this month. The DPC documenta details how high prices are increasingly taking a toll on the economy:

The Impact on the Economy

Increasing overall prices.  Energy prices contributed to increases in the Consumer Price Index this year.  During the first four months of 2007, consumer prices have risen 4.8 percent.  This rate compares to a 2.5 percent rise in all of 2006.[1]  Although the core inflation rate (excluding food and energy prices) has slowed, one economist points out that is good news “only if you don’t use energy or eat food.”[2] 

Increasing our trade deficit.  Americans spent $291 billion in 2006 on oil and petroleum product imports and sent $111 billion to OPEC countries for imports of crude oil.[3] 

Losing jobs.  On average, every time oil prices go up 10 percent, 150,000 Americans lose their jobs.[4]

Economic growth held back.  Every time oil prices increase by 10 percent for a sustained period of time, we lose somewhere between $26 billion and $142 billion in economic growth.[5]   Overall economic growth in the United States slowed to only 1.3 percent in the first three months of this year, the slowest pace in four years.[6]

Spurring fear of a recession.  Wholesale prices surged 0.7 percent in April after a one percent increase in March due to large increases in gasoline costs for the three previous months.  If prices continue to increase and troubles in the housing market deepen, economists worry that the country could move toward a recession.[7]

To read the whole document detailing how high gas prices are also taking a toll on American business please click here.

Senate Democrats have introduced legislation, S. 1419, to increase our energy independence,  strengthen the economy, reduce global warming emissions, and protect consumers.

Moreover, to promote their energy plans Senate Democrats have launched a special website - democrats.senate.gov/energy - which will serve as an online information center on energy policy and provide important updates in the coming weeks as Senate Democrats hold a number of energy forums across the country. Please check the site in coming weeks as legislation moves through Congress and Democrats work to establish more energy independent policies for our country, environment and economy.

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