John W. Schoen Senior producer • Profile • E-mail

When Alan Eskuri and his wife, Sheree, decided to buy a jewelry store in 2006 in the Mall of America in Bloomington, Minn., the business looked like a good investment that would add a second income stream to his salary as an engineer for a medical device company.

Two years later, battered by falling real estate values, a sharp slowdown in consumer spending and higher costs for everything from rent to silver, Eskuri, 34, said his business is on the verge of failing. He's already laid off most of the store's staff as sales have fallen. Even worse, his family's net worth of about $150,000 has been wiped out and they face bankruptcy.

High energy prices are crimping spending for retailers across the country, but Minnesotans are getting hit harder than many others. When we asked msnbc.com’s Gut Check America readers in Minnesota to tell us how the state’s economy was affecting them, they mentioned issues as diverse as the slump in housing prices, the turmoil the stock market and runaway government spending. But energy prices were foremost on their minds.

Minnesota is a largely rural state with long driving distances between urban areas and limited public transportation alternatives. The state’s farm economy also is feeling the surge in oil prices on two fronts: the higher cost of running farm equipment and the increased cost of fertilizers made from petroleum.

It's no surprise, then, that energy has become the No. 1 issue for Minnesotans as the Republican Party prepares to hold its convention in the twin cities of St. Paul and Minneapolis. A July 24 poll by Quinnipiac University found that energy supplanted the Iraq war as the hottest issue in the state as pump prices shot up this summer.

A pall at the mall
The high gas prices have hit businesses like the Eskuris' jewelry store hard: Tourist traffic to the Mall of America is down sharply, and local customers have less to spend on extras like jewelry, he said. And though recent federal income tax rebates were designed to keep consumers shopping, Eskuri said he hasn’t seen any benefit in his store.

“We're just very dependent on whether or not people feel they have disposable income to spend," he said. "And right now I just don’t think they do.”

Eskuri, who has two young children, figures he can keep the business going for another six to 12 months in hopes that sales will pick up. That means this year's holiday season — always the busiest time for shops like his — is critical to the store's survival.

Other Minnesotans who responded to msnbc.com's Gut Check America appeal confirmed that they're feeling the squeeze form high pump prices.

“I can no longer travel for a weekend getaway," wrote Joe Abbott from Wabasha, Minn., a small town 70 miles southeast of Minneapolis on the Mississippi River. "Gas prices have cut deeply into any entertainment money ... for things I used to enjoy once in a while."

Higher energy prices likely will sting retailers and others even more intensely when winter settles over the Land of 10,000 Lakes, because Minnesotans burn about twice as much fuel as the national average to heat their homes.

“One never knows what’s going to happen with respect to natural gas prices,” said University of Minnesota economist Tom Stinson. “But if they hold at today’s levels, people are going to be getting some pretty sizable natural gas bills around the first of December. And that’s going to be a damper on holiday shopping.”

Polls indicate state in play
Both Democrat Barack Obama and Republican John McCain have high hopes for the state. Although the state has not voted for a Republican presidential candidate since Richard Nixon in 1972, McCain and his reputation as a GOP maverick could play well in the state. Minnesota voters traditionally have shown an independent streak that in recent years led them to elect former professional wrestler Jesse Ventura their governor.

In 2004, Democrat John Kerry beat President Bush in the state by less than three percentage points, and the Republican choice of Minnesota to host the convention suggests GOP insiders believe the state could swing their way.

Polls also indicate the state is in play. Obama still held a narrow lead — 46 percent to 44 percent — among likely voters in the July 24 Quinnipiac poll, a significant narrowing of the 54 percent to 37 percent gap the pollster found a month earlier. And McCain was leading Obama in the latter survey among independent voters in the state.

Beyond the cost of topping off their gas tanks, many Minnesotans report they’re having a harder time making ends meet for other reasons. While a majority said they think their family finances are “holding steady,” about a quarter told Quinnipiac pollsters they felt they were “falling behind.”

The differences were pronounced along party lines. Some 21 percent of Republicans said they’re “getting ahead” and just 13 percent felt they were “falling behind." By a 4-to-1 ratio, Democrats who noted a change said their family finances are deteriorating.

Minnesota voters aren’t the only ones tightening their belts. The state government is projecting a budget shortfall of $835 million, or about 5.5 percent, for the current fiscal year, according to the Center on Budget and Policy Priorities. The state has instituted a hiring freeze to help close the gap, but has avoided layoffs.

After gas prices, financial issues on Minnesotans’ minds include health care costs, declining home prices (especially for Republicans) and rising food costs (especially for Democrats), all of which are taking their toll on family budgets.

"We are farther in credit card debt because we have to use it to pay for some of the things we need because of the inflation of other things," Diane Holcomb of Grand Rapids, Minn., about 85 miles northwest of Duluth, told msnbc.com.

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