This is a good article that covers some of the many effects of higher gas prices. Suburban real estate is under-performing city real estate. Car companies are laying off workers at SUV and truck factories. Consumers and businesses alike are cutting back on discretionary costs. This hurts the retail, technology, and travel industries, and could lead to more job cuts. Airlines are reducing service or folding entirely (Skybus is mentioned). In summary, all of society must become more economically efficient. One analyst quoted in the article says it will take three to five years.
Wealth Evaporates as Gas Prices Clobber McMansions
By Rich Miller and Matthew Benjamin
June 9 (Bloomberg) — Sky-high gasoline prices aren’t just raising the cost of Eugene Marino’s 120-mile (193-kilometer) round-trip to his job in the Washington area. They’re reducing his wealth, too.
House prices in his rural subdivision beyond the Blue Ridge Mountains in Charles Town, West Virginia, have plunged as commuting expenses have soared. A four-bedroom home down the street from his is listed for $239,000, after selling new for $360,000 five years ago.
Homeowners in the exurbs aren’t the only ones whose assets have taken a hit because of the surge in energy costs. Companies such as General Motors Corp. are writing off billions of dollars in plants and equipment that are no longer viable in an age of dearer oil. The destruction of wealth and capital will weigh on U.S. growth for years to come.
“Our whole economy reflects the relative costs of energy: the cars we drive, the houses we occupy, the kinds of factories we have and the equipment in them,” says Dana Johnson, chief economist at Comerica Bank in Dallas. “I’m expecting relatively large changes in all of these things.”
The loss of wealth could be a double whammy for the U.S. economy. In the short run, it depresses demand as homeowners save more and spend less, and companies fire workers. Longer run, it curbs productivity growth, as firms shift their focus from increasing worker efficiency to reducing energy costs.