Many environmentalists dream of a day where oil is no longer a key part of our economy, but this day has not yet arrived and is also not imminent in the near future. So given that petroleum is still vital to the functioning of our economy, how will recently announced cutbacks by the world’s leading oil producers impact us at home?
A report by KABC Los Angeles following the announcement noted AAA predicted California consumers would see increases of 8 to 12 cents a gallon while GasBuddy estimates increases between 5 and 10 cents.
The impact however goes far beyond just causing pain at the pump but also affects our larger economy. Retailers are impacted because consumers have less discretionary income. Airlines are impacted because more expensive jet fuel increases their costs. Food prices rise because its production and transportation to stores is dependent on fuel. Combined, these factors create headwinds on the economy that lead employers to reconsider or postpone hiring new staff, thus increasing unemployment.
In California, we have long endured some of the nation’s highest gas prices. A look at gas prices around the country reveals California is the worst place for fuel consumers, clocking in at $4.80 a gallon as of writing this post. At the other end of the spectrum, in Mississippi, consumers pay only $3.05.
Although some people blame oil companies for overcharging California consumers, it is undeniable that California’s high taxes and extensive regulations play a large part in why prices are so high.
Our dependence on OPEC is unpopular with most people, but what is the solution? Some in California’s political leadership say electric cars are the solution and they have spent billions of dollars trying to get more of them on the road.
Even still, most people in California don’t drive an electric car. In Atherton, a wealthy community where average household incomes are over half a million, 14 percent of cars on the road are electric. This is the highest percentage of any community in California. In many working class communities, less than 1 percent of vehicles are electric.
Others argue we should drill more here, pointing out more locally produced oil lessens our dependence on foreign imports. I think this is the sensible solution, but our current political leaders disagree so this may be a difficult proposition for now.
What does all of this mean for you and for your finances? To be sure, OPEC’s recent production cut will only exacerbate the significant pressures our economy already faces. This post offers several options for weathering the storm and protecting your assets.
Eric Eisenhammer
Eric is an Asset Protection Specialist. He is co-founder of Legacy Defender Insurance Solutions and holds licenses in Life and Property & Casualty insurance. Eric earned a bachelor's in Finance from California State University, Northridge and a Master's in Public Policy and Administration from Sacramento State.
