Steve Montgomery

Gas Prices Could Mean Trouble for Retail

March 9, 2010

FROM RETAILWIRE:
Gas prices are on the rise, and the question becomes, how high will they go and how will it affect consumer purchasing in other areas? Are you concerned that gas prices will rise to the point this summer that it will affect consumer purchases at retail?      [more...]

The impact of fuel pricing on an individual's purchase obviously depends on where they are on the wage earning scale. The greatest impact is naturally (and unfortunately) on those that have the least money to spend.

Fuel is not a discretionary purchase, in the U.S. for most people it is a necessity. They have no choice but to drive to where they need to go whether that is work, school, etc. We simply lack the public transportation infrastructure. There are some exceptions in cities like Chicago and New York, but these are the exception rather than the rule.

Any significant increase in the cost of fuel means less money to spend on something. The question is what? My expectation is that people are mostly rational and will cut the non-necessary item first. What those items are will certainly differ by person. One thing I believe we have seen is that small indulgences are likely to continue to be purchased.