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Effects of Gasoline Prices in Miami


The gasoline expense is a vital determining factor in the global economic performance. Due to this aspect, the shift in the oil prices results in substantial macroeconomic power. For this reason, Miami would need more energy to run its local economy. The average price of gasoline in Miami has risen significantly over the past years from $1.148 per gallon in 2002 to $4.114 in 2008. During this period, the total public transit ridership has increased at an alarming rate with the decrease in the total vehicle miles traveled (Beresteanu and Li 179). The surging gasoline costs of up to 20% threaten the Miami economic recovery (Yilmazkuday 168). As the leaders blame each other for the rise of gas prices, the escalating prices put a direct hit on the lifestyles, municipal budgets, and the big and small businesses. This paper will discuss the effect of the increasing fuel cost on the Miami economy.


Currently, an increase in the prices of gasoline has threatened the level of employment opportunities in the Miami economy. In as much, the extensive dealings with airline companies and shipping industries have increased their expenditure following the high gasoline prices (Spiller et al. 643). This change implies that the consumers cannot utilize the services as before. In return, the energy firms will suffer significant losses. When the companies undergo such risks, they have to lay off some of the employees to maintain the flow of cash by minimizing the payments made to the workers. When the firm takes the above-mentioned action, it can balance its current accounts. This activity, therefore, leads to the rise in unemployment, which is a threat to the shrinking economy. It also leads to the growth of poverty. Due to the high unemployment rate, the government sometimes examines the appropriate measures to support those who cannot earn a living and sustain themselves (Yilmazkuday 168). In this manner, the local authority must involve the taxpayers’ money, which raises the burden on the taxpayers. The transportation costs will rise as well, and both the corporate and farming sectors might experience losses.


From the above statements, one can see that several inputs such as the price of oil affect the Miami economy. The same applies to the transport system. Ideally, petroleum-powered machines powered such as automobiles and airplanes among others are a crucial necessity for the economy (Li 179). This statement implies that the use of petroleum is the only efficient energy source available that is affordable for industrial applications. As a result, higher prices for oil entail higher expenses that subsequently reduce profits for companies. However, many energy industries exploit high gasoline prices by making more proceeds than usual because of the rising demand for the substitute energy sources such as natural gas. In contrast, the massive amounts of oil have paved the way for the investment of the renewable energy. According to Grewal et al., there are various alternative energies like the wind, solar, and biofuels geothermal that have experienced rises in demand due to increasing oil prices 94).

Refinery Closure

From the reflection of the reduction in Miami gasoline demand that began after the increase in gasoline cost in 2008 and in connection with the recession, refinery capacity use rates fell from approximately 86% to 83.6 % in 2009. This decline led to a decrease in profitability in the refining industry (Lane 230). Primarily, shipping firms and retail industries revenues are damaged because of the higher fuel prices. In this circumstance, it becomes challenging for the traders to acquire oil to sell and force back the initial costs. For instance, discount retailers such as Family Dollar Stores and Wal-Mart in Miami (Grewal et al. 4) are left susceptible with the meager earnings of the customers. When this occurs, the gasoline users become more sensible to increasing prices. Conversely, online retailers that finance the shipping rates such as Amazon and Overstock have to support part of the delivery rates, which may lower their income. All these activities have rendered the refinery stations dysfunctional regarding the wastages and losses incurred from the rising oil price (Spiller et al. 643) hence, leading to refinery closure. In doing so, the economy of Miami may go down because of the small revenue concerning the collection of tax from the firms as well as the absence of other essential services rendered by the companies.


The rise in the price of fuel has led to the increase in the cost of fertilizers that depend on petroleum and natural gas to fabricate since natural gas has its supply concerns such as oil (Yilmazkuday 168). In some cases, natural gas acts as a substitute for petroleum, and in this condition, the additional costs of oil lead to the rising prices for natural gas. Hence, they increase the outlay for fertilizers. In response, farmers are constrained by the traditional means of agriculture due to the higher oil prices (Beresteanu and Li 179). When the conventional means are adopted, it becomes expensive for the farmers to deliver and shift their output to the market. Similarly, high gasoline prices in Miami have adverse impacts on farmers since it becomes difficult for them to cultivate season crops because the cost of fertilizers soars due to expensive fuel. According to Beresteanu and Li, there is a powerful link between food and fuel expenses, which can be managed if people control the fuel expenditure and offer the agriculture industries with the equipment they need to generate more products (179).

Interest Rates and Taxation

According to Grewal et al., the economic response to inflation, unemployment, low exchange rates, and less real production affect the Miami economy in the long-term (4). On the other hand, rising fuel costs lead to high shipping expenses. Consequently, maritime transport expenses signify higher taxes during transportation of the packages. On the contrary, the higher oil prices lead to the reduced investment in oil import in the economy (Lane 230). In fact, the revenues may decline while the shortage in the financial plan rises because of the inflexibility in the government expenditure that increases interest rates. It is worthy to note that higher interest rate decreases the disposable income of customers because of the service arrears. Although users enhance their spending on servicing debt, they lack sufficient funds to purchase other goods. In the same way, the rise in the gasoline prices leads to the upward pressure on the regular wage due to resistance to the actual salary decline (Spiller et al. 643). Therefore, wage pressures and lowered demand causes higher unemployment rates within a short time. Moreover, lower consumer expenses affect all business particularly small firms.

Energy Efficiency

While high pricing of gasoline has impacted the Miami economy negatively, the contrary holds when there is efficient energy in the area brought about by the decrease in the price of oil. In this context, fair gas prices have encouraged many people to purchase cars and use them frequently, lessening the conservation and reduction of the greenhouse gasses that affect the climate (Beresteanu and Li 179). Many researchers believe that this condition could limit investment in unconventional energy. Additionally, the sale of vehicles has spiked due to availability and affordability of energy. According to the current statistics, the sale of cars has increased by 5% more than the industry’s expectation. These sales rose to $17.2 million compared to $16.3 million sales in 2013 when gas prices stood at $3.27 per gallon. Despite the fact that 2014 was a record year for the venture in alternative energy like the wind and solar energy, there is preliminary evidence that investment from these renewable sources declines due to low gasoline prices (Yilmazkuday 168).

Regional Economic Disruptions

According to Grewal et al., low gas prices result in regional economic challenges (4). Although states such as Texas have been bright regions for the Miami financial system with rapid employment development and investment due to the oil boom, the changes in oil prices could become a drag. In this regard, low price rate enhances the innovation of technological means of production such as fracking technology that boosts the manufacture of oil to bring back its cost to normal (Spiller et al. 643). Fracking can manufacture oil and natural gas from rock and sand in ways it was previously unattainable. For this reason, Miami is turned into the leading oil-producing nation. In contrast, some economics discovered that an estimated amount of 30,000 employees in gasoline sectors could lose their jobs if the decline of oil prices continues as more technological advancements will be recognized in the industries (Lane 230). According to the latest analysis from the Federal Bureau of Labor Statistics, the state has already lost over 2000 jobs in the past months. In these regions, about 90% of the government funding comes from oil. Therefore, the decline in the prices of gasoline will indicate a 50% cut in the region projected funding for roads and bridge projects (Beresteanu and Li 179).


Reduction in gas prices encourages savings. For this reason, the extra cash that an individual, who either uses public transport or one’s personal vehicle, could spend on gasoline could be invested in other activities within the Miami economy. Typically, more than two million people regularly commute to work in their vehicles. As Grewal et al. state, those who commute can save at least $50 per month with the cheap gasoline (4). Likewise, in the private sector, any business that relies on fuel for its operations can save money that can be re-invested, used to facilitate profit, and reduce prices can be charged to customers or compensate workers within the premise. Additionally, the low gas price could lower the interest rates, thus, stimulating demand for sale purposes (Yilmazkuday 168). In this case, some developing industries can expand their business to allow the external investors within the firm. For example, the Miami tourism industry, which relies on the international visitors for more than 50% of its business, hopes that a sustained oil price drop will eventually drive down the cost of international airfares.


The gasoline prices are significant macroeconomic variables. This statement implies that higher oil costs can result in similar damage to the economies of oil exporting nations and on the global scale. Many regions, for instance, Miami, have increased inflation rates due to the accelerating oil prices within the vicinity. Consequently, the higher inflation rates have the devastating effect on both the manufacturers and the consumers, which expands the gap between the oil importing and exporting countries. As a matter of fact, gasoline has become the limited resource. Subsequently, many regions must develop substitute energies to stabilize their economic behaviors without experiencing significant challenges. Evidently, there is the existence of a high correlation between economic success and energy demand in Miami. In addition, developments of the living standards of the individuals depend on the existing energy infrastructure. To recap, the change in the prices of gasoline can either be an increase or a decrease. From the presented information, it is clear that an increase in gasoline cost leads to unemployment, high transportation costs, closure of refinery industries, the rise in the cost of fertilizers, and high interest and taxation rates that are essential elements in the Miami economy. On the other hand, a decrease in the gasoline costs leads to energy efficiency, regional economic disruptions, and savings. All these effects comprise of both positive and negative impacts. However, to maintain financial progress, economic experts must reinvent their production, distribution, and utilization of energy.

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