The Butterfly Effect, Coated In Oil

March 3, 2012 -- Earlier this week, the New York Post shouted the headline "U.S. Credit Card Debt Nearing Toxic Levels." The article was referring to the latest report from the Fed that in December, total consumer debt, which is the sum of both non-revolving and revolving debt, increased by 9.3 percent to almost $2.5 trillion. The increase in revolving debt, principally consisting of credit card balances, was at an annual rate of 4.1 percent. Thus, despite the fact that for a few short months in 2011 the amount of outstanding debt actually fell, the long-standing trend of strong expansion in consumer credit card debt returned with a vengeance in December, measured month over month, quarter over quarter, and year-over-year. We're slowly killing ourselves with our oil addiction, and the dealer yet again is jacking up the prices.

[Related Article: 4 Credit Cards To Help You Save On Gas]

Well, maybe it was just a merrier Christmas; maybe people caught up in acquisition ecstasy overspent during the holidays, but then again, we have nine months to pare down those balances before Santa's redux.

I would really like to believe that, but I'm not sure that I do. I believe that the real reason credit card debt is increasing is because American consumers are being squeezed between stagnant personal incomes and ever-increasing prices, particularly oil prices, which affect most everything else.Is there anyone who is still surprised by seeing the words "fuel surcharge" on bills of every description? It seems clear to me that whatever the consumer price index may say, the skyrocketing price of petroleum is starting to take a significant bite out of disposable income for many American consumers.

Let's consider a few facts– according to the AAA, the average price for a gallon of regular is today about $3.72 (the highest ever recorded at the end of a February), as compared to about $3.39 only a month ago. The AAA's most recent figures for American gas consumption show that the average driver travels about 1000 miles a month, with average fuel economy of about 22 miles per gallon. Therefore, the average American uses about 45 gallons every month, which means that he or she will spend about $14.99 more on gasoline this month as compared to last. This number, which is less than the price of two adult movie tickets, might not sound like a lot, but it adds up, especially when you multiply it across the nation.

Make no mistake: changes in gas prices have a profound psychological impact on consumers. For instance, one way that drivers deal with increased gas prices is to switch from higher-grade gasoline to lower octane. In a recent University of Chicago study, researchers found that consumers are far more sensitive to changes in gas prices than they are to the price fluctuations of other commodities, like orange juice and milk. The study found that drivers in fact, treated a $1,313 loss in net income from higher gas prices as if their households were making $100,000 less a year.

And now, once again, oil prices are spiking. If you haven't noticed by looking at the sign above the gas pump, price hikes are becoming so bold and fluid — please excuse the pun — that recently the numbers on a gas station road sign changed in the middle of a live television report, you could easily tell by the promises coming from various political figures. "Gas for two dollars a gallon!" "Gas for $2.50 a gallon!" "Don't worry folks, the Saudis will simply up production in an amount equal to the shortfall resulting from a problem in Iran, if any…"