Eating Gasoline in America

Deep in the consensus-reality shared by post-war economists is the belief that the US economy transformed itself over the past thirty years, and now operates with much less sensitivity to energy costs. Indeed, in the cheap oil era and as the US developed its FIRE economy (finance, insurance, real estate), the energy inputs needed to create GDP certainly declined. But this also served to lull economists into yet another false rulemaking as they converted temporary conditions into permanent ones. For, beginning in the year 2000, the US economy–which had admittedly made great advances in power sector efficiency–became quite sensitive again to energy as the price of oil discovered America’s Achilles heel: our leverage to gasoline.

The research now establishing economic sensitivity to high oil prices, especially for commuters from America’s suburbs, is myriad. Indeed, depending on how high gasoline prices go, housing affordability itself is now more likely to fall with distance. This was only exacerbated in the past ten years as home buyers, looking to escape housing inflation, migrated further and further from city cores, to the peripheries. More broadly, we now understand that poverty is now a phenomenon of the suburbs, according to a study released this year by The Brookings Institute. And given that trend, I have taken another look at one of my favored indicators: food stamp usage. Below is a chart of food stamp users (the SNAP program) in one of America’s quintessential post-war, car commuting regions: San Bernardino County.

The chart begins in 2004. In late Spring of that year, oil prices would lift above 40 dollars a barrel for the first time and they would rise above 55 dollars later that year, before dropping back by December. Food stamp usage had been roughly flat in 2003 and also took off in 2004. It’s possible that some will conclude that the rates of change in oil prices had the greatest correlation with pressured household budgets. Along with 2004, 2007 also saw a large percentage change in oil prices. Readers can draw their own conclusions of course. One of mine is that the continued advance in food stamp usage in the post 2008 crisis period, to its current 276 thousand users, would combine the can’t-get-no-relief pressure from gasoline prices along with the broader effects of the burst credit bubble and collapsed economy.

San Bernardino County began the post-war period with roughly 200,000 residents in 1945. It would hit a 2.1 million residents 65 years later, in 2010. A ten-bagger. We thus are handed a grim comparison: the county now has more persons on food stamps than its total population when it began its classical post-war buildout: the vast housing divisions and towns, all served by large freeways running west to Los Angeles.

Food stamp data is an excellent portal through which to gauge economic sensitivity to gasoline prices, because to be in need of food stamps and to qualify for them helps us locate a threshold of economic pain, in the American household budget. Why? Because the average food stamp benefit per month is roughly 340.00 dollars per household. If your family needs an extra 85 dollars a week to put enough food on the table, you can be confident that a change in petrol prices from two dollars to three dollars, or especially to four or five dollars a gallon, matters. And not a little. Especially if one is commuting 60-90 miles per day.

The Department of Agriculture released this week the latest figures on national food stamp usage. The SNAP program nationally now serves 40.8 million people as of May. A new all time high. Without introducing more recent issues into the discussion, such as the second wave of food inflation now underway from the grains complex, it seems we can now assert a few things about the data. First, it’s fairly shocking that an agricultural supergiant such as the US should now have to provide a second, printed currency to 14% of its population, to buy food. Second, this is clearly informing to the ongoing debate over inflation and deflation, as the totality of US wages, energy costs, and living expenses has resulted in a lurch downward in purchasing power. The notion that food is “cheap” is now proven to be wrong. Very wrong, at least, for Americans. And finally, as the food stamp subsidy is distributed each month to 40 million Americans, there is little doubt that this merely offsets other basic running costs for utilities and petrol. Every household that takes them is surely struggling also with their electric, natural gas, and gasoline bills. In other words, food stamps are really Food and Energy stamps.


Food Stamp/SNAP Program Data for San Bernardino County through April 2010: State of California Department of Social Services.

Photo: Freeway Interchange, Los Angeles, 1967, by Ansel Adams.