This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

What Happens When Gas Hits $5? $7? $10?

Updated to correct a reference to additional taxes levied by states on regular gasoline.

BOSTON ( TheStreet) -- If you were around in the 1970s, you'll undoubtedly cringe to recall leisure suits and disco dancing. Even more unsettling: the memories of trying to pump gas.

Twice during a decade marked by double-digit inflation -- in 1973 and 1979 -- oil shortages caused by an OPEC embargo and political unrest in Iran, respectively, made it costly and aggravating to fill your tank.

In 1979, short supplies of gas meant rationing and lines of cars stretching far down the streets.

In 1979, gas sold for roughly 90 cents a gallon, a little more than $2.60 in today's dollars and much less than the $4.14 high seen in 2008. But short supplies meant, in many states, that you could gas up only on designated days of the week. Lines were huge, stretching far down the streets of service stations. Sales of lockable gas caps soared as a preventative to roving thugs who would brazenly siphon out your hard-fought fuel while you slept.

Today, with gas above the $4 mark at many Exxon-Mobil (XOM), BP (BP) and Chevron (CVX) stations across the nation, things haven't gotten quite that bad. There is, to be sure, pain at the pump. But gas supplies remain healthy and free -- despite political unrest in many oil-producing nations. People grumble and count their pennies, but they seem to have adjusted. In fact, gas prices appear poised to even drop a bit in coming days.

But when will they get pushed over the edge? Is $7 a gallon enough to cause personal pain? Is $10 unthinkable or a worrisome milestone that will eventually get here, as it did in Europe?

How high, or low, gas prices will go is really anyone's guess. What you pay at the service station now has as much to do with commodity speculation, the value of the U.S. dollar and taxes as it does with the actual supply chain.

The government could, for example, levy greater taxes to raise revenue and, in theory, reduce consumption.

The federal excise tax on gasoline is 18.4 cents per gallon for regular, and states and local municipalities add their own increases. For example, the total tax hit averages 66.1 cents in California, 63.6 cents in Connecticut, 64.2 cents in Hawaii, and 52.8 cents in Florida.

The Obama administration tried to distance itself quickly from a plan to tax motorists by tracking each mile they drive, which was contained in a leaked draft of the Transportation Opportunities Act. A similar proposal for a mileage tax was floated by the nonpartisan Congressional Budget Office as one method to fund plans to spend $556 billion over six years on transportation projects.

Here's what happens when a gallon of gas hits $5, $7 and $10:

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,987.51 -61.49 -0.36%
S&P 500 1,985.54 -11.91 -0.60%
NASDAQ 4,567.5980 -24.2080 -0.53%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs