Given the recent record-high gas prices, economists are analyzing the widespread impact soaring fuel costs will have on local businesses. Turns out, the pain at the pump slows down our economy.
According to University of San Diego profession Alan Gin, every 10-cent rise in gas prices drains $8 to $10 million dollars out of San Diego’s economy every month.
By his calculations, a 50-cent rise means up to $50 million taken out of the economy -- and burned in consumers’ engines.
That’s the very same money people could’ve used to buy clothes, go to the movies, or go out to eat at a local restaurant.
“Consumers are spending that money when they could've been going out to eat or buying clothes or somehow pumping money into the economy,” explained Gin.
That rise in gas prices hurts businesses in other ways too.
The San Diego Fence Company in Kearny Mesa has seen business come back in recent years. But rising gas prices is putting plans for continued company growth on hold.
The company drives 12 trucks all over the county while delivering their products to customers. Their cost of fuel is factored into every job estimate.
But when gas prices spike, they can’t pass the cost on to customers or they’ll lose business, said company president Don Kidder.
“You bid too high you’re not going to be attractive [to the customer] and get that job,” explained Kidder.
Kidder said his business is actually bouncing back nicely from the recession. However, today’s high cost of fuel is keeping him from buying trucks and hiring employees.
“I'm at a point now where I feel like we can expand more and get back to where were in terms of trucks and run more trucks, but what has hurt me are gas costs,” Kidder told NBC 7 Monday.
To help him plan ahead, Kidder said his suppliers for steel and wood fences give him some idea of where prices will be at for a few months. Still, he said these sharp spikes in gas prices make it extremely difficult to keep costs consistent and under control.
According to Gin, decisions like raising gas prices are a blow to the economy and directly translate into fewer jobs and less spending on equipment.
That's in addition to less spending by those who have to cut something else out of their budget to afford filling up the tank.
However, the economics expert hopes it doesn’t put a halt to our economy that’s struggling to rev up.
“That's probably not enough to derail the economic recovery that we're in right now, but it doesn't help,” he added.