A few weeks ago, the Census Bureau released troubling data showing that the U.S. poverty rate jumped from 14.3% in 2009 to 15.1% in 2010, the highest it’s been in 17 years. Now economists from the Peterson Institute report that one third of the increase in poverty over the past year was caused by rising gasoline prices. The U.S. makes up a smaller share of world demand for oil than it did in the past, so, while global oil prices dropped during the height of the recession, they rebounded strongly last year despite America’s continuing economic difficulties. In 2010, the price of crude oil increased 30% and gasoline prices rose by 18%, pushing nearly 1 million people into poverty.
While higher gas prices hurt everyone, they hit the poor hardest because gasoline makes up a much larger share of their daily expenses. Those with incomes in the bottom 20% spend a whopping 10 cents out of every dollar of their income on gasoline. A 2008 map from the NY Times shows that poor, rural areas are hit hardest by rising gas prices, as people living in these areas have little money to spend on gas but need a lot of it to drive to work.
The Peterson Institute analysis only looked at the impact of rising gas prices and didn’t include the other ways that higher oil prices strain household budgets by increasing the price of goods and services that require oil for their production and transport. Energy costs are one of the fastest-growing items in the Consumer Price Index and have been one of the main factors driving recent consumer price inflation. Unfortunately, gasoline and crude oil prices have continued to increase steadily in 2011, suggesting that the poverty rate may reach even higher this year and next.
Energy Poverty American Style
Peterson Institute // Trevor Houser, Shashank Mohan // September 26th, 2011