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In Reply to: Gas Out EVERYONE READ PLEASE posted by Activist on March 03, 2000 at 15:43:29:
Ultimately, if oil and gasoline prices stay high, consumers may alter behavior that has been shaped by relatively cheap gasoline prices.
Based on previous episodes of rising oil prices, such as the one triggered by the Iraqi invasion of
Kuwait in 1990, consumers are likely to treat them as temporary and not cut back their spending on other goods and services. But if they think higher oil prices are here to stay, consumer spending might fall and slow
U.S. economic growth noticeably.
Like oil prices themselves, the impact of the increases is hard to predict. Higher prices for crude oil imported into the United States
during 1999 cost the nation about $40 billion. That was the equivalent of a tax increase of the same size, because that extra money flowed out of the country. If prices rose to $40 a barrel and stayed there, according to Macroeconomic Advisers, that would be like a tax increase of about $90 billion.
According to economist Joel Prakken of Macroeconomic Advisers, if oil prices were to rise to and remain at $40 a barrel for a year, the nation's economic growth would be almost a third--or about a percentage point--lower than it would be if oil prices average in the mid-20s in 2000.
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