![]()
- 'Modern Warfare2' May Be Biggest Event This Year
- Why the Health Care Bill Is Facing a Tough Senate Fight
- Home Prices Start to Stabilize In the US as Sales Pick Up
- Former SEC Lawyer Pleads Guilty in NY Fraud Case
- Flaw in US Data Overstates Growth, Productivity
- Do You Know Your Coca-Cola Myths?
- 'The Onion' as Trading Indicator? Ask Radio Shack
- Goldman Sachs Head Says Banks Do 'God's Work'
- Framed for Child Pornography — by a Computer Virus
- Modern Warfare 2's Record-Breaking Launch
- Merck’s Mega-Monday Morning
- Why are Traders Bullish on This Food Company?
- Profiting From Natural Gas: Strategists
- S&P Stocks Trading at New 52-Week Highs
- Shopping for Answers
- 3 Hot Mid-Cap Stock Picks: Portfolio Manager
- Busch: G20 Affirms Weak Dollar
- 'Nice Opportunities' in Health Care Sector: Stock Picker
MOST SHARED
- Flaw in US Data Overstates Growth, Productivity
- Home Prices Start to Stabilize In the US as Sales Pick Up
- Israel: Leader of Business Innovation
- McDonald's October Sales Top Estimates
- BofA Board in Civil War Over Lewis' Successor
- iPhone, App Strategy the 'New Dot Com?'
- Why Health Care Bill Is Facing Such a Tough Fight in Senate
- Solid 3-Year Auction Gives Boost to Treasury Prices
- S&P Stocks Trading at New 52-Week Highs
- Rock Band Weezer Uses Snuggie to Promote New Album
Americans could be celebrating the Fourth of July with $5-a-gallon gas, and the effects will ring out from sea to shining sea.
As consumers use more of their income to fill up their gas tanks, they'll have less to spend on discretionary items like new bathing suits to wear to the beach and jewelry to accessorize.
![]() |
Instead of visiting theme parks and ballgames, they'll be more inclined to find fun things to do at home--"stay-cation" has quickly embedded itself in the American lexicon--and will cook burgers and hotdogs on the grill before heading out to a fancy restaurant.
These are just some of the behavioral changes economists and investment advisors are anticipating as the U.S. enters a new age of energy prices and inflation.
While economic data released Friday showed that core inflation remains stable even as gas prices soar, that's been of little comfort to many consumers.
"The consumer is petrified right now and they have every right to be," says Michael Kresh, president of M.D. Kresh Financial Services in Islandia, N.Y. "It's not just the gas prices going up and going up so rapidly. But in the last two months food prices are following at a very high clip. Your basic staples that you need are getting more expensive.
"It's clear that people are going to stay close at home this summer. That's going to be a ripple on the economy."
How far that ripple carries is a matter of debate.
Impact on the Economy
Some economists say energy prices are too small a part of GDP to have a major effect on the overall economy. But others caution that energy is too much a part of the workplace and everyday behavior to be ignored.
"We're talking about when a person at the end of the day has cashed their check and they go to fill their car. What's left?" says Deborah Hewitt, associate professor of economics at the College of William & Mary. "It's important to take the broad view on this one. Energy drives the economy. Every firm out there has to use energy in some form to produce what they produce."
The automobile industry will face the most direct hit from the gasoline surge, Hewitt says, but she points out that numerous other areas also will face big changes.
Consumers will buy fewer discretionary items--think designer clothes, smartphones, home improvement items, and a plethora of other things related to leisure and vacations. Hewitt also sees the tire industry hurting as people drive longer on their current tread. Vacation spots already are seeing a decline in reservations, and the battered airline industry also will see fewer passengers.
Longer range, Hewitt expects more people to begin to move out of the suburbs and into cities to save on travel costs and be closer to work. At the same time, she says unemployment could continue to grow as profits diminish at large industrial operations that use fossil fuels to power their plants.
But not all the news is doom and gloom. Hewitt says some industries actually will benefit from oil's shocking surge.
Capital equipment manufacturers, who make the components needed to build more mass transportation, will be in demand. Research and development firms looking into alternative energy sources and solutions to the high energy prices, along with battery manufacturers, also should do well.
Some urban real estate centers will grow, as could agriculture when people start demanding more products made closer to home because of cost reductions through transportation costs.
"This has been a shock to our system," Hewitt says. "It's one that most people believe is going to continue and it's going to take restructuring in some key industries in our economy to get over this."
- Cramer did the research and found eight stocks that lead the pack. Read on to get his top picks.
- On the anniversary of the fall of the Berlin Wall, many in the former Eastern Bloc recall communism fondly.
- Software, biotech firms, even banks are watching a particular Supreme Court argument today.
- CEOs try their hands at comedy and find that running a company may be an easier task.
- Dow Chemical is building a filter that uses reverse osmosis to purify contaminated H2O.
- A nascent website aims to make renting high-end dresses as easy as renting a movie.












