Thursday, May 12, 2011

Latinos and Latino businesses hit hard by high gas prices

Latinos and Latino Businesses Are Hit Hard by High Gas Prices

We Need Oil Reform that Lifts the Economic Burden

SOURCE: AP/Celina Fang
Sandra Martins of Hyannis, Massachusetts, adds gas to her car at a Mobil station. The 2009 Consumer Expenditure Survey shows that Latinos on average spent a full percentage more of their income on gasoline and motor oil than the rest of the population that year.
One rapidly growing segment of our country’s population is suffering disproportionately as the price of gas continues to soar. Latino families and businesses are bearing a heavier financial burden than most as fuel costs tick upward. This fact is compounded by high unemployment rates and fiscal year 2011 budget decisions that disinvest in alternative transportation options.

According to a poll conducted by the Public Policy Institute of California, or PPIC, 83 percent of Latinos in that heavily car-dependent state name gas prices as a source of financial hardship. This comes despite their willingness to carpool and purchase fuel-efficient vehicles.

The PPIC poll results show that California Latinos are the least likely to report commuting alone to work. This finding is reflected on a national scale by both the 2000 and 2010 U.S. Census. And at 81 percent, Latinos are also more likely than African Americans, Asians, and whites to have considered buying a more fuel-efficient car as a result of gas prices.

Rising fuel costs have hurt all American families. But while many are being forced to reevaluate their driving habits, the 2009 Consumer Expenditure Survey shows that Latinos on average spent a full percentage more of their income on gasoline and motor oil than the rest of the population that year. This is consistent with a 2008 Center for American Progress analysis, which found that overall, “minority families spend disproportionate shares of their income on gasoline and fuel.” The authors explain that in 2006, “Hispanics and Latinos were the hardest hit, devoting 5.4 percent of their income before taxes to gasoline and motor oil expenditures.

And that’s before the Great Recession cut 3.1 million jobs between the first quarters of 2007 and 2008. Unemployment shot up by 44.3 percent according to a Pew Research Center study, severely cramping the finances of these newly jobless Americans. The same study found that Latinos were singularly affected: “[The percentage increase in unemployment] was highest among foreign-born Latinos [at] 58.3 percent, or 348,000 persons. Unemployment among native-born Latinos increased by 49.1 percent, [or] 329,000 persons.”

What’s more, job loss among Latinos began earlier than for other groups, suggesting more long-term unemployment. And high gasoline prices make it more difficult for them to reenter the labor market since it is increasingly more expensive to drive to multiple job interviews.

The 2011 budget compromise makes matters worse by cutting transportation alternatives. It delivered a $4 billion, Republican-backed blow to new mass transit options that would have both reduced oil use and created millions of jobs. This unfortunate disinvestment extended to new transit starts, railroad, and high-speed rail.

Meanwhile, the big five oil companies—BP p.l.c., Chevron Corp., ConocoPhillips, Exxon Mobil Corp., and Royal Dutch Shell p.l.c.—announced their 2011 first-quarter profits in the last week of April. The total was in excess of $32 billion and a result of sky-high oil prices. For the past five years, the companies have reinvested nearly 60 percent of this massive income in dividends and stock buybacks, enriching already wealthy Big Oil executives. Exxon Mobil alone spent $5.7 billion of its earnings to repurchase company shares and drive up their price in the first quarter of 2011.

Crude oil prices have not been as kind, however, to the finances of Latino-owned businesses. Instead, their entrepreneurial success comes with a steadily rising price tag. Latino-owned firms in the United States totaled 2.3 million by 2007. The nearly 44 percent growth from 2002 was close to double the national rate, which over the same five-year span increased by only 18 percent.

This amounted to a significant economic contribution. While many Latino-owned businesses are smaller operations with a handful of employees, the numbers add up quickly: The U.S. Census Bureau reports that in 2007 Latino-owned firms “employed 1.9 million people, an increase of 25.7 percent from 2002, and their payrolls totaled $54.6 billion, an increase of 48.7 percent.”

But now the recession’s crippling effect on small businesses throughout this country has been compounded by the increase in fuel costs. The vast majority of Latino-owned enterprises are heavily petroleum dependent—almost one-third of these businesses are in construction and repair, maintenance, personal, and laundry service sectors. An additional 200,000 firms are transportation and warehousing enterprises. These types of businesses often rely on gasoline-fueled transportation and heavy machinery. Fuel costs therefore severely impact the operation costs of these firms, and in some cases the runaway price of gasoline forces these businesses to shut down.

Conservatives would like to convince us that a “drill, baby, drill” strategy will lower prices at the gas pump by expanding the national oil supply. Unfortunately, this misguided theory would have no impact on the price of crude. Overt reliance on oil—the global commodity that accounts for more than two-thirds of the cost of a gallon of gasoline—is the real problem.

Since January, unrest in the Middle East and North Africa has given Wall Street speculators the opportunity to cash in on fears of a potential supply disruption. By gambling with oil prices, investment bank Goldman Sachs estimates that Wall Street speculators have inflated costs by more than $20 a barrel.

Meanwhile, many congressional Republicans still insist on supporting $4 billion a year in tax giveaways for oil companies while these companies continue to bring in massive profits. These GOP representatives accept a vast majority of Big Oil’s lobby money and therefore find it in their interest to support this “corporate welfare” while slashing funds for fuel and transportation alternatives.

Crude oil prices will continue to hold all American wallets hostage to the fluctuations of the global marketplace until we are able to shrink oil use by increasing vehicle efficiency, using cleaner fuels, and investing in public transit. We need to invest in solutions that bring us “cleaner cars [and] less foreign oil” before the high gas prices plaguing this country further disrupt job growth and impede our still-shaky economic recovery.

Latinos—and all Americans—should not be locked into car dependence while being forced to spend increasing amounts of their hard-earned cash on fuel. It’s a free country.

Jorge Madrid is a Research Associate and Valeri Vasquez is Special Assistant for the Energy Team at American Progress. 

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