Lately, international oil prices have been setting record highs. There have been several other periods, most notably in 1979, when oil prices (and consequently gasoline prices) spiked, causing some serious disruptions in normal economic behavior. The following looks at some of the most significant impacts.

1) SUVs and Pickup Trucks: Consumers switch their allegiance from gas “guzzlers” to passenger cars that get better mileage. Sales of pickups and SUVs are plummeting in favour of compact cars. This can devastate some auto sector towns. For example, General Motors has just announced that it will close four North American truck and SUV factories next year. One result will be that 2,600 jobs will be lost in Oshawa, Ontario. Asian-based car makers have become the leaders in small and mid-sized car production.

2) Buses: The cost of diesel fuel has shot up alongside the price of gasoline. Municipalities with public transit systems are feeling the pain of higher fuel costs.

3) Long-haul Truckers vs Trains: In times like the present, the tonnage cost of moving cargo by train usually gains a considerable advantage over the “ribbon of highway” method.

4) Roadbuilding (and repairs): This is another headache for government. Roadbuilding construction (and repairs) has been made more expensive by the climb in asphalt prices.

5) Airlines: The cost of jet engine fuel has also shot up. The airline industry seems to keep going through difficult periods every couple of years, when bankruptcies, takeovers and consolidations become the order of the day.

6) Consumer Confidence: There are two aspects to this issue. Uncertainty is a terrible thing when it comes to consumer confidence. First, when one is wondering how high gasoline prices are likely to go, this can tend to put other spending decisions on hold. Second, the amount of money that now has to be expended to fill the family car(s) leaves a good deal less to be spent on such discretionary items as eating out, going to the movies, buying new clothes and so on.

7) Resort Areas: Any resort communities that are customarily reached by car are likely to experience hard times. Bed and Breakfasts are particularly susceptible.

8) Cottage Country: In previous times of high fuel costs, cottage prices sputtered and stalled. The cost of driving to that “getaway” lakeside retreat just becomes too expensive. On the other hand, if you have the finances, now may be a good time to pick up that bargain property you’ve always dreamed of.

Member Comments