This Day On The Street
Continue to site right-arrow
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
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

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 - Get Report), BP (BP - Get Report) and Chevron (CVX - Get Report) 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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
AMTD $37.26 0.11%
BP $39.11 -1.83%
CVX $104.98 -1.80%
FDX $165.45 -0.78%
ETFC $28.56 1.12%


DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

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