Current gas prices are not only straining Indiana residents at the pump, but they may also begin to affect home life and work opportunities.
The director of Center for Business and Economic Research, Michael Hicks, said the Indiana unemployment rate could reach full employment by the end of the year, based on rapid job growth in recent months. Hicks said if the rate of growth continues, it is possible, but economists are beginning to worry about the higher gas prices affecting such a goal.
Gasoline has an impact on almost every market in the United States and most fields of industry rely on gasoline for transportation means. By increasing the price of gasoline, companies are forced to prioritize their money so that they can afford the changes.
"It creates less spending on goods and services, which leads to a reduction in the demand for workers who are providing those goods and it increases the price for non-gasoline related goods, which reduces consumption and also the demand for workers who produce those goods," Hicks said.
Not only does the gasoline affect the businesses that need to transport goods, but it changes how consumers spend money. Because the consumer is not going to need less gasoline to function normally, they must adjust spending habits to adapt, Hicks said.
"Gasoline plays both a demand and supply role in the economy," Hicks said. "High gasoline prices reduce the demand for non-gas goods and services, because consumers have a very inelastic response to the consumption of gas. So the price for gas doubles and the demand for gas doesn't change at all, so that's just money being pulled out of other goods and services."
Even students are being forced to acclimate since gas prices in central Indiana have begun to average more than $4.00 per gallon.
"The gas prices suck right now," senior social studies education major Brian Herod said. "Usually, I just cut out social stuff and weekend activities if gas gets expensive. But if it gets bad enough, I might just start taking the MITS bus to work."
Hicks said three things are currently influencing the cost of gasoline, which include the sluggish supply response to increased demand, converting to the reformulated gas mix and fears about supply restriction in response to war in the Middle East, which may be the most influential factor.
Despite the fact that Indiana has already been affected by the first and third factors, it has yet to deal with the price increases of reformulated gasoline that other states have been dealing with, though that should change come summer.
"The changeover to reformulated gas mix has mattered in Florida and California, but here in Indiana, it will be about a month or so before we start seeing the price increases of reformulated gasoline mixes that were part of the amendments of the 1990s Clean Air Act," Hicks said.
He said the new gasoline formulas, in conjunction with increased fuel demand during the months of May through August, could result in increasingly expensive fuel costs throughout the summer.
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