Economics on the small scale

Friday, March 31, 2006

Energy Prices and Personal Finances, then and now

Via The Big Picture, Floyd Norris wrote:
[T]he share for energy use climbed to 6.2 percent of personal consumption expenses. That is the highest in 15 years, but it is far below the peak of 9.3 percent reached in the first quarter of 1981, during the second oil-price shock.

The difference between 1981 and 2006 is that in 1981, the savings rate for the country as a whole was near 11%, while today it is 0%.

Real Income levels have also fallen slightly over the past few years.

Which means that we're in a zero-sum-game type situation: Energy companies can capture more income from consumers, ...but not without some other part of the economy taking a hit.

Also, wasn't 1981 the start of a fairly severe recession ?


At 07:16, Blogger Barry Ritholtz said...

The savings rate difference is an excellent point.

At 6.2%, it pinched consumers; At 9.3% it kills much of their discretionary spending . . .


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