Record Crude Oil Prices and the U.S. Economy
ALEX CHADWICK, host:
From NPR News, this is DAY TO DAY. I'm Alex Chadwick.
Coming up, NPR Africa correspondent Ofeibea Quist-Arcton in Niger on the hunger crisis across West Africa.
First, the lead: pumping gas across the US. Gas prices heading for record highs--that's trouble for everyone who drives. which means practically everyone in the country. People are worrying: economists, politicians, businesspeople who know that retail sales drive our economy. This week, the CEO of the nation's largest retailer, Wal-Mart, said customers have put the price of gasoline at the top of their list of concerns. Joining us is Howard Davidowitz. He heads the retail consulting firm Davidowitz & Associates in Manhattan.
Howard, can we begin with this expression of concern from Wal-Mart CEO Lee Scott. When you read that, what did you think?
Mr. HOWARD DAVIDOWITZ (Chairman, Davidowitz & Associates): Well, I go even beyond that. We're energy-dependent, and when you look at what's going on, the world's biggest oil producer, Saudi Arabia, completely unstable, this Wahhabism and everything else. It's hurricane season and the US oil wells in the Gulf of Mexico may be at risk. We have a major energy crisis. We've know it for 20 years. We've done absolutely zero. America lives in a fool's paradise. That's our style.
CHADWICK: Hey, you know, you're in retail consulting. People buy what they want to buy.
Mr. DAVIDOWITZ: You got it, and here's how they're doing it. They're re--the consumer has the highest debt in the history of the United States. Interest rates are going up. The consumer has no savings. How have we continued to spend money? How has this consumer continued to spend? Here's how. The savings finally went down to zero and they're hocking their houses, taking second and third mortgages. We go right on spending. We're the world's biggest consumers. When you look at the whole picture, here's what you know: We can't keep it up.
CHADWICK: You have an analysis of what you call the Wal-Mart customer and what the cost of energy means to this person.
Mr. DAVIDOWITZ: Right.
CHADWICK: It's a thousand dollars a year. Would you explain that?
Mr. DAVIDOWITZ: The reality of the Wal-Mart customer is when you make $44,000 in the family of four and--between home heating oil and gas and everything else, a thousand dollars of your disposable income goes away, and that's the number that's gone away. You have to understand the real America. We get confused. A hundred million customers come to Wal-Mart a week. Twenty-five percent of them don't have bank accounts. When they come to the store, they have $18 in their pocket and they have to buy food and everything else. But you got to understand that's a large part of America.
CHADWICK: You said there were a hundred million people shopping at Wal-Marts a week. That can't be true.
Mr. DAVIDOWITZ: A hundred million Americans.
CHADWICK: So you're saying that a third of the country is about at their limit, and they are the people who are trying to struggle with an increased cost of living of a thousand dollars a year, and that's all energy prices, and that's what's going on?
Mr. DAVIDOWITZ: The problem is that person shopping at Wal-Mart is the one struggling to survive. They're in survival mode. If you look at where these kind of people shop, you're going to find that their sales--and all the places they shop are under stress. And the point is you're taking money out of their pocket. The mess that's been created is beyond imagination, and the economic consequences are going to be huge.
CHADWICK: Howard Davidowitz, chairman of the retail consulting firm Davidowitz & Associates, speaking with us from Manhattan. Howard, thanks again.
Mr. DAVIDOWITZ: Thanks for inviting me.