March 15, 2000

March 15, 2000 | News Releases on Energy and Environment

Rising Oil Prices Will Cost American Families $1,324 and U.S. Economy 500,000 Jobs

WASHINGTON, MARCH 15, 2000-It will cost the average American family of four $1,324 and the American economy nearly 500,000 jobs if oil prices remain at $30 a barrel for the rest of 2000, according to Heritage Foundation economists.

The simulation, using WEFA's March 2000 U.S. Macroeconomic Model,1 demonstrates that the increase significantly harms family budgets and makes it more difficult for families to save for the future. The simulation also shows that jobs, investment, and real economic growth all decline while prices rise significantly.

Specifically, the Heritage analysis suggests that $30 per barrel oil would:

  • Decrease economic growth by 0.7 percentage points in FY 2000 from 4.2 percent to 3.5 percent. By the end of FY 2002, real GDP would be $114.8 billion less than the WEFA baseline forecast.
  • Decrease disposable personal income in FY 2002 by $92.3 billion (using 1992 inflation-adjusted dollars), or by $1,324 for the average family of four. In response to this significant decrease in family budgets, consumer spending would fall by $79.6 billion.
  • Decrease job opportunities by 484,000 in FY 2002 and increase the unemployment rate by 0.3 percentage points to 4.5 percent.
  • Decrease business investment in FY 2002 by $25.7 billion less than the WEFA baseline forecast.
  • Decrease the federal budget surplus in FY 2002 by $23.2 billion as tax revenue falls because of slower economic growth and higher inflation increases spending.

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