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Ripple effects

MBJ Editorial

The high cost of gas is one of those economic indicators that everyone feels. Economists don’t have to explain the complicated underpinnings of getting a tankful of unleaded from Middle Eastern crude for the average American to know that gas prices are at record highs.

But, the impact isn’t simply on consumers filling up their personal vehicles for commuting to work or taking the kids to soccer practice. Higher prices of gas have far greater consequences than most folks realize, as the impact of higher gas prices ripples out into the economy.

One example: just about anything purchased requires transportation to get to the consumer. Transportation costs, obviously, are linked to the cost of fuel. Diesel prices traditionally have been about the same as the lowest cost of gasoline. But now diesel is more than high grades of gasoline. It is estimated that 80% to 85% of the freight transported in Mississippi is moved by trucks.

And a related issue, higher gas prices also affect the cost of highways. In some cases the cost of asphalt is up 50% over a year ago, says Tone Garrett, executive director of the Mississippi Asphalt Pavement Association.

Manufacturing is one the hardest hit sectors when fuel prices increase. Manufacturers not only pay more in transportation costs to get raw materials in and finished products out, but also are one of the biggest users of natural gas and electricity — which is often produced by natural gas.

“It just ripples through the economy when fuel of any kind goes up,” said Mark Leggett, director of government affairs, Mississippi Manufacturers Association.

So, there is little comfort to be taken in knowing that from commuting to commerce we’re all taking a hit on the high costs of gas and other energy resources, but at least we’re not alone, right?

Little comfort, indeed.


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