$100 Oil Crushes American Family Budgets
Sharply escalating oil prices are straining the budgets of America’s middle class, and impoverishing lower-income families. In 2008, 60 million American households with annual incomes below $50,000 will spend 22% of their aftertax income on energy, double the share of income they spent in 1997. The prices of gasoline, natural gas and home heating oil have skyrocketed, propelled by increased oil costs. Among consumer energy products, only electricity has maintained a relatively stable price trend over the past decade.
Key findings include:
- Energy costs are consuming nearly one-fifth of the after-tax household incomes of low- and middle-income families, an amount traditionally spent on food, housing or health care. In 1997, low- and middle-income families earning less than $50,000 annually spent about 10% of their after-tax income on energy. In 2007, energy will consume 19% of their after-tax family budgets.
- Between 1997 and 2007, average energy bills for American working families earning between $10,000 and $50,000 per year will nearly double, from $2,401 in 1997 to an estimated $4,555 in 2007. Most of this increase is due to higher costs for gasoline, which will increase from $1,143 per family in 1997 to $2,721 in 2007.
- Residential electric bills for working families earning between $10,000 and $50,000 are projected to increase modestly from $811 in 1997 to $1,081 in 2007. The relatively low rate of electric price increases is due in large measure to the utility industry’s reliance on low-cost domestic coal for a majority of its energy inputs.
- The transportation share of total energy bills for the 61 million families earning less than $50,000 – the majority of American households - will rise from 44% in 1997 to 56% in 2007. Residential electricity costs will decline from 36% of the energy budgets of these families in 1997 to 25% in 2007, reflecting the low rate of price increase for residential electricity compared to other energy sources.
- The poorest families, well below the federal poverty line and earning less than $10,000 per year, are being squeezed hardest by recent energy cost increases. Their residential and transportation energy bills will rise from 23% of after-tax income in 1997 to 47% in 2007. Many of these families will receive state energy assistance to help reduce the burden of higher energy costs.
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