Much of the attention surrounding $3-a-gallon gas prices has focused on what this means for politicians seeking re-election. But the story that’s not being told is of how soaring prices impact middle-class Americans, especially those who struggle to balance the rising cost of homes or rent, groceries, commuting and other expenses.
Take a clerical worker who earns $30,000 in salary, drives 30,000 miles a year and gets 20 miles a gallon. The 70-cent jump in fuel prices we’ve seen since January adds up to more than $1,000 in additional gas costs a year. That’s a lot. The worker is also more likely to face higher maintenance costs than well-paid professionals, since his car is older and breaks down more regularly — further eating into his modest wages.
Squeezed commuters who havemoved far from urban centers in order to find affordable housing are particularly affected. It’s not uncommon for today’s workers to log 40 miles a day back and forth from the office. And keep in mind that wages have been flat since 2001, despite soaring fuel costs.
Fifty-four percent of Americans have had to reduce household spending because of high gas prices, according to a poll conducted earlier this month by Gallup, CNN and USA Today. Wealth is the dividing line between those who have to cut back on driving and those who do not. A majority of those earning less than $50,000 are curtailing the miles they put on their cars, compared to 36 percent of those earning above the $50,000 mark.
What’s so disappointing is that our federal government doesn’t seem to care. The recent energy bill amounts to a giant tax break for Big Oil. The same oil companies are also enjoying a $7 billion government giveaway for drilling on federal lands.
President Bush tried to change his tune Tuesday, finally acknowledging that Americans are anxious about gas prices. But his ideas are too little, too late. Suspending refills to the Strategic Petroleum Reserve, as Bush proposed, will increase the domestic supply by less than 1 percent. Bush wants to make it looks like he cares. But in reality, he’s still firmly in the corner of the oil industry in which he once worked.
All this comes at a time of record profits for Big Oil. Exxon Mobil alone raked in $36 billion in net income last year, the largest ever for any American corporation. Executives are also profiting from the high prices, and handsomely. Lee R. Raymond, the recently departed head of Exxon Mobil, walked out the door with a package valued at more than $400 million. His total compensation translates into a stunning $144,573 a day for leading the company between 1993 and 2005, according to The New York Times. Over at Chevron, meanwhile, chief executive David J. O’Reilly took home about $37million in stock options, bonuses and salary. And Occidental Petroleum’s Ray R. Irani received $63 million.
These profits should be easing prices at the pumps. Instead, oil companies and their leaders want us to pay $3 or more for a gallon for gas. They prosper from it. A study of the California market by the Foundation for Taxpayer and Consumer Rights even found evidence that corporate markups and profiteering caused most of the recent price spike.
House and Senate Democrats now rightly call for a windfall-profit tax on oil companies that avoids taxing exploration and development of new production. In addition, Sen. Robert Menendez, D-N.J., is seeking to suspend the federal gas and diesel taxes for 60 days, which would reduce the price of gas by $0.18 for gas and $0.24 for diesel. The lost revenue will be easily made up by taxing the surging oil profits.
For now, however, the oil forecasts don’t look much brighter. Supply is limited. Global unrest is causing further jitters in the markets. And demand is soaring, thanks to the rise of economies in China, India and elsewhere. Nor are companies like Exxon paving the way for a more secure future. Last year, Exxon spent more on share buybacks and dividends than on development and exploration.
But the real burden will be felt by America’s working people. We live in a suburbanized culture. Lifestyles are built around the family car. Increases at the pump affect everyone’s daily lives — but particularly those of people at the bottom of the economic ladder. For them, an additional $1,000 a year in gas costs is unmanageable.
What we’re seeing now is a new divide, between those who can absorb the pain at the pump and those who can’t. Unfortunately, the profiteering of oil companies is exacerbating the disparity between rich and poor.
James P. Hoffa is the general president of the International Brotherhood of Teamsters.
