Back in January, more than 130 million Americans learned they'd be receiving a little boost from Uncle Sam. The government would dole out $170 billion to help boost the economy, which, at the time, looked bad. The subprime crisis was really starting to heat up, the dollar was tanking, and nervous consumers squealed like baby dinosaurs over the possibility of losing their beloved phantom wealth facilities: home equity lines of credit.
Phew! Just when we thought the economy would self-destruct before our eyes, those stimulus checks started making it to people's bank accounts. Checks started showing up last month, and they should be fully distributed by the end of summer. So … everything's cool now, right? Some 130 million people are hundreds of dollars richer, right?
Well ... that depends on how you define "richer." When the package was announced in January, oil was around $90 a barrel -- an astonishing high at the time. Mentioning $100 oil drew fearmongering "give me a break" stares.
That was then, this is now.
Last Friday, oil clocked the largest one-day gain ever, shooting past $138 a barrel. A Morgan Stanley analyst recently forecast that oil will hit $150 by July 4 -- less than a month away. For the first time since maybe the 1970s, the price of crude oil has become a common household topic. We all know that its rise has dented consumers' bottom line, but how much of those anticipated stimulus checks will go towards oil's mounting tab?
All of it. And then some. In fact, around double the amount.
Americans consume around 20.7 million barrels of oil a day. To put that in perspective, the U.S. represents less than 5% of the world's population, but consumes nearly a quarter of its oil production. With around 304 million people calling the stars and stripes their home, the average American consumes roughly 25 barrels of oil per year.
Since the package was announced in January, the price of crude has jumped around $50 a barrel -- more than 50%. The math from here is pretty easy: Average per-capita consumption of 25 barrels per year, times an increase of $50 a barrel, and the average American is staring at an increase somewhere in the neighborhood of $1,250 a year. Yes, oil ate your stimulus check, and it didn't even say thank you.
Hold on …
This is argument is slightly skewed, admittedly. For one, increasing oil prices will partly benefit companies like ExxonMobil
America imports 10.12 million barrels of oil a day, or around 3.69 billion barrels every year. Accounting for the same $50-a-barrel increase in the price of crude since the time the stimulus package was announced, the increase alone in what we're shipping into the country every year -- $185 billion – is roughly the same as what the government handed out via the stimulus package. Where does all that money go? Mostly to America's top oil import buddies: Canada, Saudi Arabia, Mexico, Nigeria, Venezuela, and Iraq.
Easy come, easy go
While the stimulus package was designed to get consumers moving, it isn't likely to do much, if anything, once all is said and done. What counts isn't the dollar amount people have in their bank accounts. It's how far each dollar will go -- how much your "purchasing power" is. What initially appeared to be a boon to retailers like Best Buy
Then again, those who considered the package a real economic stimulus in the first place were pulling their own legs. Money shifted from the government's coffers to consumers' pockets isn't real gained wealth to begin with. But when the price of the nation's top import skyrockets? That's real lost wealth.
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