That’s true, but there is an underlying assumption that people actually budget for these things.
Emotional people, we are.
It feels more painful… and we decide based on that. Numbers do not necessarily contribute to the analysis other than that we “feel”.
So far this war has cost me (at the pump, home electricity, etc.)… about $28
Would you say you’re a good representation of how most people are impacted?
Just looking at gas and diesel - burden is estimated at $227.52 per US household.
Edit - looks like it’s currently going up $.005 per minute.
Certainly not.
But then again, micro economics follows the individual. My point was that “feels” matter more (only?) to those who do not do math.
Pricing changes (and anchoring) serve only to bias the feels.
We all know prices are going up. We all know this is bad. We all know that the impacts of these changes are inflationary. and so on…
But the average consumer reducing travel is not about some financial math on a spread sheet with cold calculated budgetary and fiscal analysis.
It’s about the feels at the moment. Longer term, something will have to give.
No one said it was.
Consumers reduce travel because they’re worried they can’t afford it. Some people have financial math on a spreadsheet with calculations and analysis. Some do it based on vibes. But they all know that because gas prices have risen by a buck fifty, they have less money today than they expected to have two months ago, and they’ll almost certainly have even less money than they expected to have two months from now.
Many households can’t take a hit of several hundred dollars without making some adjustments. They don’t need a spreadsheet to know that. So it’s not surprising that some of them might look at vacations as a likely piece of discretionary spending that can get trimmed back to accommodate the unexpected expense.
It’s always about the feels, whether people closely track their finances or not.
The last administration made the mistake of ignoring people’s feelings while pointing to economic data to make the argument for a strong economy. The current goons are making the same mistake.
Don’t pay attention to inflation and slow economic growth…the DOW is at 50,000!
IMHO that seems low by about an order of magnitude. Are you considering labor costs for services, food costs, airline costs, toll costs, restaurant costs, hotel costs, and retail costs. All these costs are rising because of the war.
Don’t make plans to buy a plane ticket in the near future.
Here’s the harsh truth: “Jet fuel accounts for as much as 20% of an airline’s overall expenses, and it’s more than doubled in price due to the war in Iran,”
…
The issue isn’t limited to overseas travel, though. United Airlines recently announced that it’s increasing ticket prices by as much as 20% in response to rising fuel costs. Across the industry, the average economy-class ticket price sold through travel agencies is up 21% from a year ago, according to Airlines Reporting Corporation.
It’s an excellent point. If I factored in costs my employer is incurring (I didn’t), my costs would be MUCH higher.
I’m sure my customers will eventually be paying for this. But I don’t see those costs, yet.
Just because I’m not bearing these costs, doesn’t mean I don’t see them. But I don’t feel them. And isn’t that what it’s all about in this microeconomy?
Jet fuel is up 3 to 4 times in price. The airlines make a margin on top of that. Possibly.
I am going to Spain in August, but the ticket was booked months ago. The airline would have bought the futures on the fuel at that time. Still, the flights could get reshuffled if some flights are canceled.
This is part of my thesis in investing in Transmedics(TMDX). Their underlying business is not impaired by logistics in any way that is not ALSO offset by surcharges.
The customer is… shall we say, inelastic demand?
The stock has been down ~50% from recent highs on similar concerns about energy prices, but flights are up, revenue is up and surcharges to offset fuel costs are up.
They report on 5/5.
I was wrong, jet fuel is up 2x.
Yes people are flying.
The bottom 50% of households are getting into credit card debt. The recession has begun.
Survey says:
Just 56% of Americans now plan to drive more than two hours this summer, compared to 69% last year, a new GasBuddy survey shows. Cost is now the dominant travel consideration, with 67% saying gas prices are directly impacting their driving plans and 36% saying rising costs are causing them to take fewer road trips, the survey shows.
Another survey says:
Some 44 percent of U.S. adults say they’ve cut back on driving because of high gas prices, according to a survey in late April from ABC News, the Washington Post, and Ipsos.
Either all of these surveys are wrong, or people respond to price as economics suggests: buy/demand less when price goes up.
The US tourism industry is estimated to account for 7-10% of GDP, including secondary effects beyond just hotels, amusement parks, and restaurant revenues. (For instance: supplier to restaurants, toll road revenues, etc.)
Tourism is generally a “desirable” industry, not a lot of toxic waste or pollution, generally decent jobs, etc.
The energy costs take money not just from consumers’ wallets directly, but also cost jobs in this segment and the supplying segment(s). Some of that can be ameliorated by “stay-cations”, but (for example) restaurant revenues are likely to be down at least some, as are AirBnB, hotel, etc. revenues.
How big the effect remains to be seen, but it happens every time there’s a gas “crisis”. Stay tuned.
The new militant green energy policy is working.
Global oil demand falls in 2026.
Keeping the pressure on:
The [empty vessel] administration had demanded Friday that Iran publicly guarantee safe passage through the strait, a key U.S. condition for halting the cycle of fighting between the two countries.
Instead, the Islamic Revolutionary Guard Corps (IRGC) struck a commercial cargo ship and declared the strait “closed until further notice.”
