Even with rising gas prices and shaking the economy, Americans continue to drive

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The shocks of rising gasoline costs are bouncing back into the economy, and industry analysts see little relief on the horizon.

Retailers and trucking companies are very concerned about a worsening diesel shortage that could lead to intermittent rationing in some places. Similar concerns are sweeping the aviation industry as jet fuel becomes scarcer. Manufacturers are grappling with the cost of plastic packaging, which is made from the same crude oil in which gasoline is in high demand. Even boaters are considering whether they should delay putting their ships in the water, now that filling their tanks can add hundreds of dollars.

Price hikes even affect school meals. In Davenport, Iowa, snacks from the rainbow islands and other fresh fruits and vegetables delivered as part of a federal grant to encourage healthy eating were put at risk as gas prices soared to over $4. The seller charged an additional fee to cover higher fuel prices, forcing some schools to end deliveries early.

The baking problems came next. The company that delivered it initially asked for a hefty surcharge for fuel before eventually telling the area not to disturb. She said she can’t stand loaves still arriving in schools next year at all. District turned to another company, paying nearly twice as much — $40,000 more — for less frequent deliveries.

“It’s very stressful,” said Connie Dobells, director of food and nutrition services for the Davenport School District. “People keep saying, ‘Aren’t things in schools better this year than they were last year? “They are not. I’ve never experienced anything like this before.”

Biden takes additional steps to ease gas prices as inflation soars

Gas prices emerged as a particular concern amid other worrying signs about the US economy. Fears that the country could head into a recession, sparked by major retailers who reported lower profits this week, helped push the S&P 500 index briefly into bear market territory on Friday before a rally late in the day. The prices of food, shelter and other forms of energy have also risen steadily, driving up inflation.

Fuel price keeps passing Previous milestones, averaging $4.59 per gallon nationwide. That’s 50 percent higher than gas was at this time last year, according to the AAA, as factors converge to create supply shortages not seen since the run-up to the Great Recession of 2008.

While the war in Ukraine plays a major role, with the world shunning Russian oil, it does Not the only challenge. The drop in fuel demand during the pandemic has prompted producers to scale back their investments in drilling and refining capabilities. The oil and gas sector now finds itself ill-equipped to meet the demand of a society that is back on the road. The federal government has exhausted most Limited tools It has to contend with price hikes, such as the release of oil from the Strategic Petroleum Reserve.

“The bottom line is, it’s going to be an expensive summer,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets.

Treasury Secretary Janet L. Yellen echoed the warning this week, albeit in calmer language During a visit to Germany The upward pressure on energy prices is likely to continue in the near term.

Yellen warns of global “stagflation” risks from gas and food prices

As rising gas prices force Americans to change their spending habits, the one thing Americans aren’t doing is drive significantly less. All this impulse at this moment of reduced fuel supply is driving prices higher. “With the door reopening, there’s a lot of pent-up demand,” Tran said. “People are willing to pay higher prices to make up for lost travel over the past few years.”

It’s a different economic landscape than it was when gas prices last rose like this, In the summer of 2008. At the time, Americans had been in a spending frenzy for a while and household savings rates were particularly low. Unnecessary driving was a luxury that Americans could not afford at the time. Gas prices fell again relatively quickly after a short rally.

By contrast, household savings are now at record levels, after people spent less during Corona Virus pandemic. “We, as residents, have never been more willing to absorb higher gas prices than we are now,” Tran said. So even as prices continue to rise, demand is not waning.

The Memorial Day weekend is expected to bring 37.9 million Americans to the road, more than car travel that weekend before the pandemic and an 8.5% increase from last year, when gas prices were much lower, according to the Expectations By location data company Arrivalist. The company attributes this trend in part to Americans abandoning air travel. Plane ticket prices have become Expensive For many as the airline industry struggles with its own fuel scarcity.

While the “American Road Trip Thrive” pass isn’t overrated, some drivers are amazed at what they see at the pump.

Amanda Ludwin of Silver Spring, Maryland, was finally able to attend her nephew’s wedding in Death Valley National Park, which stretches across Nevada and California, this month after it was postponed twice due to the coronavirus. The already expensive ride came at an unexpected cost: The price for an unleaded gallon at Death Valley Fairness Creek gas station, the only place to refuel for miles, was $8.25.

“It cost us $120 to fill our truck,” Ludwin said. “It was a huge shock.”

Like many other Americans, though, the 67-year-old doesn’t plan to cut back on her travel. She’s looking forward to a road trip across the country in the fall regardless of whether gas prices are high at the time. “People have been very careful with their money for a long time,” she said. “It will not stop us from going where we want. … I want to see the great prairie.”

Even as old driving habits persist, high fuel prices are forcing Americans to make other adjustments. Walmart this week saw its biggest drop since 1987 amid an earnings report that admitted high gas prices are hurting its business. They create unexpected operating costs for the company and also change the ways consumers shop, leading them to standardize their trips to the store and forego buying items that are not daily necessities.

Because they see a lot of their money going into their gas tanks, Walmart CEO Doug McMillon said on this week’s earnings call, “Customers are more price sensitive right now. … They’re paying close attention.” He described Walmart shoppers at the moment as “wallet managers” who carefully balance their budgets and are reluctant to buy something like a piece of sports equipment unless they see a drop in prices.

Consumers are also affected in unexpected ways. a Ten year old study I’ve found obesity rates tend to fall when gas prices rise — not so much because people give up their cars to walk or cycle but because they cut budgets for services like house cleaning and gardening, choosing to burn calories doing it themselves.

Meanwhile, older drivers who struggled with gas shortages and the stagflation of the 1970s are likely to link higher prices at the pump to the sagging economy and cut their spending soon, according to a recent report. Study based on extensive survey data from Gallup.

“I grew up waiting in line to get gas,” said James Castle, an investment banker in Miami. “Most people don’t remember that.”

While Cassell said he was relieved not to have reclaimed the long lines at the pump that carried it through the 1970s, high prices create a series of problems for the mid-size companies in which he invests. Fuel and other costs for manufacturers are increasing very quickly, he said, as big retailers are relaxing their rules on when manufacturers can raise prices for products on store shelves.

But that doesn’t mean that consumers won’t just buy generics. Cassel is working with a food company that is struggling to adjust its budget to fit exorbitant gas costs and estimate whether it would lose more customers if it raised the price of its product or instead should cut costs by downsizing.

Economists and energy analysts warn the outlook is bleak that this cycle of energy price increases that leads to more inflation will end anytime soon. There are only a few things you can finish. One is the massive increase in available oil, gas and renewable energy, which most analysts say is years away. The other is stagnation.

A less painful alternative to recession would be consumers getting tired of higher prices and moderately falling back on their spending on gas and other products, leading to lower demand for fuel.

“If this isn’t the year that coronavirus re-emerges, I’d say consumers start cutting back when gas hits $5 a gallon,” Tran said. But I’m hesitant to make those predictions for this summer. A year from now, everyone will probably have a crush on travel and the demand is starting to drop.”

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