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May 16, 2006

Why gas prices are not crippling us

With prices at the pump approaching $3 a gallon, you might think the economy will soon be grinding to a halt. N.C. State University's Mike Walden explains why the economy seems to be rolling on.

"Consumers are still buying gasoline. They are changing their car-buying habits a little bit, but not overwhelmingly. So despite, of course, our concern and criticism of gas prices things do seem to be continuing," says Dr. Walden, an economics professor in the College of Agriculture and Life Sciences. "The big question ... is, 'Why?'

"And I think one reason why is that despite our outrage over gas prices they are still a relatively minor part of most household budgets. That is, even with today’s high prices, the average household spends less than 7 percent of their after-tax income on gasoline and oil.

"Now that is going to vary by level of income: For lower income households it’s higher, up around 13 percent; middle income, about 6 percent; higher income households, about 3 percent.

"But overall gasoline is just not that big a deal yet in our family budgets."

Posted by deeshore at May 16, 2006 08:00 AM