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Higher gas prices are taking a heavy toll on the income of average San Diegans, and could hamper economic growth in the region, already expected to be anemic, a new study from the National University System Institute for Policy Research suggests.

Gas prices are up 25% in the last three months, rising from an average $3.50 per gallon average on December 21 to $4.37 by March 12, according to SanDiegoGasPrices.com. For the typical consumer, spending on gas rose from 4.3% of total income in 2010 to 6.2% by early 2012. This equates to an extra $463 spent per person on auto fuel per year.

“Put another way, the increase of gas price alone is more than the average household in San Diego spends on all their consumption of cereal and bakery products, or the entire average annual budget for public transportation,” say the study’s authors.

While over the long term increased fuel costs are expected to put a damper on demand for gas as consumers shift toward more efficient cars and cut their total travel miles, in the more immediate future gas consumption is expected to dip only slightly, as workers still need to commute to their places of employment and many are unable to simply purchase new cars offering better economy.

Because low and middle income families already spend most, if not all, of their income on routine monthly expenses, the extra money required for fuel is likely to siphon funds from other sectors as consumers are forced to choose between the gas to get to work and other staples such as groceries and clothing. Another option is taking on more household debt in an attempt to maintain current standards of living.

Due to this, the study authors predict that if gas prices hold steady at their current $4.37 average it could shrink the overall local economy’s expected growth rate by 0.3%, or about 17% of the projected 1.8% economic growth, as consumers spend the same amount of money but purchase fewer goods overall. This lower spending, the experts say, “operates much like higher taxes in slowing an incipient recovery. In other words, higher gas prices drain purchasing power from the economy. That means families get hit twice: once by the direct impact on household budgets and a second time when higher prices restrain economic recovery.”

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Comments

Dennis March 16, 2012 @ 12:46 p.m.

"For the typical consumer, spending on gas rose from 4.3% of total income in 2010 to 6.2% by early 2012. This equates to an extra $463 spent per person on auto fuel per year." Dave, I don't know where the % of total income figures come from but in order for spending on gas to equal 6.2% of total income the typical person would be making less than $25K per year. At 12,000 mi per yr a vehicle averaging 20 mpg would use 600 gal of gas at a cost of $4.37 per gal that equals $2,622 per yr. At $3.50 gal it's 2100/yr.

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Dennis March 17, 2012 @ 12:22 p.m.

Sorry Dave but your link does not work, it appears a password may be needed to access the data. The real question however is what are they using as total income for a typical user? If it's less than $25K or assuming less than 20 mpg that's not a reasonable number.

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Dave Rice March 18, 2012 @ 4:37 p.m.

Hmm, I'm having an issue with the link now myself. Try this:

http://www.nusinstitute.org/Research/Briefs.cfm

Unfortunately the source of their income numbers isn't identified, and from a couple other sources I've seen it seems the figures are more suited to a per-capita income level than per-consumer.

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