The disproportionate impacts of energy costs on lower-income

and minority families, 2008

EnergyBiz Forum 2009Washington, D.C.

Study focus

• Determine average family incomes for Hispanic, black and white households, using U.S. Census Bureau data.

• Calculate energy costs by household income group, using U.S. Department of Energy survey data and final energy price data for 2008.

• Show the disproportionate impacts of high energy prices on all lower-income households and on minority families.

Price Trends of Consumer Energy Products, 1990-2008

0.00

0.50

1.00

1.50

2.00

2.50

3.00

1990 1995 2000 2005

1990

=1.

00

Electricity Nat'l Gas Gasoline

Source: U.S. Department of Energy (residential electricity and natural gas, retail gasoline averages).

Key findings

• Energy prices have risen steadily for the past two decades, with the sharpest increases over the past five years.

• Gasoline and residential natural gas have increased the most in percentage terms: 172% and 135% since 1990, respectively.

• Residential electricity prices have increased just 44% since 1990, below the rate of inflation (67%).

• The use of low-cost domestic coal for more than 50% of electricity generation has helped to keep electric prices low relative to other energy sources.

• Recent energy price declines are likely temporary, tied to the global economic recession.

Energy price impacts on family budgets

• One-half of American families earned less than $50,000 in 2008. Energy prices are squeezing family budgets for all Americans, especially the 50% of households earning less than $50,000 annually.

• Minority families are disproportionately impacted by high energy prices because 62% of Hispanic families and 66% of black families earn less than $50,000 annually, compared to 48% of white households.

Energy costs for families earning less than $50,000 nearly doubled between

2001 and 2008

$1,110

$1,128

$2,406

$806$493

$790

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2001 2008

Electricity Other residential Gasoline

Source: U.S. Department of Energy.

$2,428

$4,281

Energy costs in 2008 consumed 20% of the after-tax incomes of families earning less

than $50,000 annually, up from 11% in 2001

11%

20%

0%

10%

20%

30%

2001 2008

Source: U.S. Department of Energy, U.S. Bureau of the Census

Energy costs as percent of income in 2008 for families earning less than $10,000, and

those earning $10,000 to $30,000

52%

22%

0%

10%

20%

30%

40%

50%

60%

<$10K $10K-$30K

Source: U.S. Department of Energy, U.S. Bureau of the Census

Key findings

• Half of U.S. households paid 20% or more of their after-tax incomes on energy in 2008.

• Poor and working families – those with incomes less than $30,000 - paid nearly one-quarter of their after-tax income on energy in 2008.

• The very poor – those with incomes below $10,000/year – paid about one-half of their incomes for energy. Some of these families received government energy assistance.

Taking a closer look: 2008 energy expenses for minority families

Average after-tax family incomes

$38,446$41,028

$54,931

-$5,000

$5,000

$15,000

$25,000

$35,000

$45,000

$55,000

$65,000

Black Hispanic White

Source: U.S. Bureau of the Census

Average after-tax incomes of families with incomes less than $50,000

$19,484$20,935 $21,864

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Black Hispanic White

Source: U.S. Bureau of the Census

Percent of households with pre-tax family incomes less than $50,000

66% 62%

48%

0%

20%

40%

60%

80%

Black Hispanic White

Source: U.S. Bureau of the Census

Energy costs in 2008 as percent of after-tax income, Hispanic families earning less than

$50K/year

42%

17% 16%

0%

10%

20%

30%

40%

50%

<$10K $10-$30K $30-$50K

Source: U.S. Bureau of the Census, U.S. Department of Energy.

Energy costs in 2008 as percent of after-tax income, black families earning less than $50K/year

56%

23%19%

0%

10%

20%

30%

40%

50%

60%

<$10K $10-$30K $30-$50K

Source: U.S. Bureau of the Census, U.S. Department of Energy.

Key findings: energy price impacts on minority families

• 62% of Hispanic families and 66% of black families earn less than $50,000 annually, compared to 48% of white households.

• The inequality of income distribution makes minority families disproportionately vulnerable to energy price increases.

• Black and Hispanic families earning less than $30,000 annually spent 27% and 23% of their after-tax incomes on energy in 2008, respectively, reducing their ability to pay for other necessities such as housing, food, education and health care.

Looking ahead• 2008 marked an historic high for U.S. energy prices, driven by

unprecedented global oil demand and tight crude oil supplies.  • Gasoline prices have retreated from the $4 per gallon highs of last

summer, but are creeping back up and have not fallen as fast as imported oil prices.  Further increases are expected as the summer driving season approaches.

• Future price increases for oil and natural gas are virtually certain due to the higher costs of finding and producing new petroleum supplies.  Domestic coal is the only fuel projected to remain stable in price due to ample supplies.  As a result, the Department of Energy projects that electricity prices will increase by only 4% from 2008 to 2010.

• American consumers can prepare for the next round of energy price increases by investing in more energy-efficient products and appliances, including the next generation of "plug-in" electric vehicles.

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