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Higher gas prices ripple out into state's economy

The cost of gasoline continues to rise across the state, and with that rise comes an increase in the cost of doing business in Mississippi.

Industry observers are mixed in their assessments of what the effects will be on the state`s economy but agree that at least in the short term, rising gas prices could spell difficulty for Mississippians in general.

According to the AAA.com fuel cost survey, the average price per gallon for regular unleaded gasoline in Mississippi is $1.73, compared to a $1.81 national average. Those averages are up from an average price of $1.63/gallon last month in Mississippi and $1.75/gallon nationwide. A year ago, Mississippi`s average was $1.47/gallon compared to a national average of $1.75/gallon.

Dr. Patrick Taylor, associate professor of economics at Millsaps College, said that the uncertainty of the geopolitical situation may be adding to the spike in gasoline prices, as well as speculation about the amount of oil available due to announced cuts in production by OPEC nations earlier this year. However, he believes that the rising price for crude will prove too tempting for oil-producing nations to resist.

“OPEC is notorious for cheating,” said Taylor.

However, he notes that even as Mississippians complain about the rising cost of gasoline, their buying behavior doesn`t seem to jibe with their worries, noting that SUVs and other large autos continue to be a hot seller for the carmakers.

Taylor surmised that rising gasoline prices have the highest direct effect on workers on the lower end of the wage scale, who may drive farther to work and for whom gasoline makes up a bigger part of their monthly expenses. However, the rapidity of the rise in price per gallon terms is also a factor in consumer thinking.

“If we have been planning to spend X dollars, and it goes up by a third in a month`s time, you think, ‘Boy, this is expensive gasoline,'” said Taylor.

One area of Mississippi`s economy that is directly dependent on the driving habits of consumers is the state`s tourism industry. According to Brian Richard, director of research for the Mississippi Gaming Association, most who gamble in Mississippi come to the state by car from within a 300-mile radius of the state.

“At least 90% of Mississippi customers are drive-in customers,” he said.

Richard said that their organization members have not reported any severe drop-offs in business at the state`s casinos. The improving economy is helping the tourism industry as much as higher gasoline prices are hurting it.

“There`s probably an offsetting effect,” he said.

Jack Kyle, director of the Mississippi Commission for International Cultural Exchange, said that the only customers he knows he`s not getting for The Glory of Baroque Dresden due to gasoline price increases are school groups – a mainstay of his customer base in the early days of past exhibitions.

“The cost of gas and diesel has impacted their ability to take field trips,” said Kyle, citing teachers and principals who have called him.

The exhibit has sold between 54,000 and 55,000 tickets since its opening – about half the amount they sold up to this point for The Majesty of Spain exhibit four years ago, according to Kyle.

Visitors to past MCICE exhibits have generally come from within a day`s driving distance from Jackson – a 500-mile radius, with about 50% of adult visitors coming from points within Mississippi and 50% from outside the state, Kyle said. Some groups are forgoing bus tours and flying directly out, particularly visitors from Texas.

However, Jay Moon, president of the Mississippi Manufacturers Association, said that if higher gasoline prices become a permanent increase in the cost of doing business, then the impact is going to be widespread on his members as well as on consumers. Whether it`s paying to ship raw materials into the plant or ship finished products out, industry is anticipating increased transportation costs in all phases of its supply chain.

“Many of the transportation and trucking companies are beginning to start adding surcharges to cover some of those costs,” said Moon. “Transportation costs are one of the major costs that manufacturers have.”

Some measures his members are taking are negotiating longer-term transportation contracts to hedge against further increases expected this summer. Manufacturers that operate their own truck fleets are looking to maximize the efficiency of those operations, including consolidating routes and moving more product on individual trucks.

“They’re trying to protect themselves, not knowing what the ceiling is on gas prices,” Moon said.

Both Taylor and Moon offer businesses a way to keep on eye on what may occur in gasoline prices in the short term. Moon suggests watching crude oil prices and computing changes in gasoline prices from that figure.

“For every dollar more paid for a barrel of crude oil, it adds another 2.5

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