Here’s another indication that Americans and our economy have signs of trouble due to high gas prices. Personal debt has soared while income has stayed flat barely inching up at 2% a year, not even close to keeping pace with inflation much less high gas prices. There’s only so much money to shift around to compensate for the higher cost of everything. People can only cut back so much before they dip into savings or go into debt just to live day to day. This doesn’t fare well for toll roads and their investors…
Here’s a snippit of the article to give an idea of what’s happening:
Econ 101: Of prices and profits
By Tom Ramstack
THE WASHINGTON TIMES
July 16, 2006
The utility bills arrive like clockwork — electricity, phone service, cable — and they seem to keep rising. Then there’s gasoline for the car, a once- or twice-weekly expense.
Meanwhile, salaries are inching up slowly, if at all. Spreading that income to cover the increasing costs is becoming more difficult and sending consumers further into debt.
Average household debt soared nearly 34 percent between 2001 and 2004, while income rose 2 percent, according to the Federal Reserve Board’s latest Survey of Consumer Finances, released in February.
As U.S. consumers were trying to pay for record-high gasoline and other energy prices after Hurricanes Katrina and Rita last year, Exxon Mobil reported its 2005 profits — a U.S. record of $36.1 billion.
Some members of Congress were infuriated, accusing Exxon Mobil and other oil companies of profiteering during an energy shortage caused by hurricanes last year. They called executives from the major oil companies to testify twice in recent months about how they can justify such high income and threatened to reinstate a windfall-profits tax.
Not only did the world’s largest oil company earn record profits, but it paid retiring Chief Executive Lee R. Raymond compensation of $98 million in a pension, $32 million in stock futures and $38 million in salary, bonuses and stock options in 2005.
“Obviously, they need to make some kind of profit,” said Chris Bettencourt, 38, a police officer filling up his Ford F-150 pickup at a New York Avenue Exxon station on a recent afternoon. “They’re a company. But when they’re making record profits and gas prices are at all-time highs, there’s a problem there.”
He paid $3.18 a gallon for regular gasoline. “If the price gets to $3.50 a gallon, I’m definitely trading [the F-150] in,” Mr. Bettencourt said.
Although many consumers are screaming about rising prices, rising profits and rising executive compensation, financial analysts say the companies to whom U.S. consumers pay their monthly and daily bills are running healthy business operations.
“We’re a capitalist society and a free market,” said Bob Dobkin, spokesman for Washington utility owner Pepco Holdings. “Are we going to limit what companies make? Hopefully, supply and demand will take care of that.”
Pepco pays, too
Pepco Holdings Inc., which provides power and heat to about 1.8 million customers in the District, Maryland, Virginia, Delaware and New Jersey, knows it always will have a market for its electricity and natural-gas supply business, which it sells through three subsidiaries.
In the District, households pay the utility an average of $1,143.31 per year to keep their home appliances, lights and heaters operating.
Last year, Pepco Holdings made a $371 million profit on total revenue of $8.06 billion, which translates to a 4.6 percent profit margin. The margin so far this year is running about 4 percent.
Meanwhile, utility rates have risen about 40 percent in the past two years.
“Most of what is driving the price of electricity these days is the price of fossil fuel, coal and oil and natural gas,” said Tony Kamerick, Pepco Holdings treasurer. The fuel is used to power the generators that produce electricity.
To read the rest of the article, go here:
http://insider.washingtontimes.com/articles/normal.php?StoryID=20060715-114727-1563r.