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U-T Special Report
As $7 a gallon gas looms, big changes are in store for family finances, regional lifestyles and the national economy. The San Diego Union-Tribune introduces a four-day series on the impact of rising oil prices.
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Part 1: Gas costs squeeze middle-class families in San Diego County trying to make ends meet. |
Part 2: The price of gas is changing commuters' attitudes on what they drive and even where they live. |
| Part 3: Soaring fuel costs take huge bite out of grocery, farm budgets. |
Part 4: We may be heading back to 1970s-style “stagflation,”.
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If you think paying $4.50 a gallon for gasoline is too much, think again.
A growing chorus of economists and market analysts warns that prices could hit $7 a gallon by 2010. Some even say prices could shoot to $12 to $15 a gallon by 2013.
“We're on the verge of profound shortages of oil,” said Stephen Leeb, head of Leeb Capital Management in New York. “We may have reached the point where we can no longer produce enough oil to meet demand.”
If such predictions come true, the impact would be severe and far-reaching.
A lasting rise in the cost of oil would push up prices for oil-based products ranging from plastic to nylon to many food products that depend on petroleum for fertilizers and diesel for tractors and transportation.
Those price increases would eat into personal budgets, forcing consumers to cut back on spending. Gregory Clark, who heads the economics department at the University of California Davis, estimated that if gas hits $15 per gallon, the American standard of living would decline by 11 percent.
That kind of decline in spending would compel businesses to trim their operations and lay off employees, which would have a snowball effect on the economy.
“To a certain extent, oil is the lifeblood of our civilization,” said Robert Hirsch, energy consultant for Management Information Services in Washington, D.C. The continuing price increases, he warns, “could damage the very fabric of the way we live.”
