July 5, 2022

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Gas prices reach record, ripple effect on economy feared

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(NewsNation) — Motorists know the lousy feeling they get at the gas station lately, pumping hard-earned dollars into their vehicle’s tank each week.

That’s especially true now, as we are getting less for our dollar with gas prices spiking in the wake of a potential ban on Russian oil imports over its invasion of Ukraine.

Prices at the pump were rising long before Russia invaded Ukraine, but have spiraled even faster since the start of the war.

According to GasBuddy data, the U.S. national average set a new all-time record of $4.104 a gallon Monday, eclipsing 2008’s record.

Gasoline prices are now the highest American motorists have ever faced.

The U.S. national average for a gallon of gasoline has soared more than 45 cents a gallon in the past week, according to auto club AAA data.

Higher gas prices mean that each of us pays more at the pump, leaving us less money to spend on other goods and services. This creates a ripple effect, hitting hard in many industries.

“I’m basically working so that I can drive to work,” said one motorist.

In general, higher oil prices are a drag on the economy and can impact everything from consumer spending to the transportation of those goods and services we rely on each day.

Consumers’ discretionary spending drops when they spend a larger portion of their income on gasoline.

For consumers, the higher cost of getting to the grocery store is on top of higher prices at every store.

In Huntsville, Alabama, assistance groups are now seeing more families in need of food donations.

“It’s just the cost of living,” said Fran Fluhler, Manna House charity founder. “Everything is going up, their auto insurance, their cellphone bill, their utility bill is higher. They just can’t quite put it together. They have a job, they just can’t quite make it.”

Price shock is driving a change in habits all over the country. For some, allocating the extra dollars toward topping off the tanks can lead to life changes, buying less of something, for instance, or holding off on that big purchase. Choosing to purchase a more fuel-efficient vehicle, such as a hybrid, can also be a decision affected by higher gas prices. 

Higher prices at the pump can also mean consumers will drive less. This has a negative effect on the retail marketplace. This spending depression was also seen during the COVID-19 lockdown as consumers were less likely to travel to patronize businesses.

This change in spending habits squeezes retailers, which are then forced to pass on the higher costs to consumers. Less discretionary spending can mean decreased sales for businesses. This can also affect a company’s ability to hire, which means high gas prices can lead to fewer job openings.

Full-time Las Vegas rideshare driver Robert Davison predicts a shrinking of the driving pool due to gas prices.

“You can do the math. You’re definitely losing a chunk of your income,” he said. “It’s going to phase out a lot of drivers, I think.”

That’s also expected among drivers for restaurants and services such as Uber Eats, Door Dash and Grub Hub.

Inversely, online shopping can increase due to an increase in the price of gas.

But as online orders increase, so does the need for shipping and transportation, all of which would require a larger consumption of gas. As a result, anything that has to be shipped or transported would then cost more.

Gas is a big expense, especially for businesses that rely on global transportation chains to get their product to market. The soaring price per mile has transportation companies facing tough decisions.

Michael Johnson, operations director for Roly’s Trucking, said, “We’re going to come up with some strategies and talk with our customers, I think that’s the first way to do it … and be honest with them, we can’t operate at a loss.”

Another ripple effect is expected soon for airline travelers.

Airfares are predicted to go up just as demand goes up for spring break and the summer travel season.
For some airlines, fuel can be nearly half of the total operating cost.

When gas prices spike, airlines are forced to increase ticket prices offered to travelers, which may discourage nonessential air travel and put a further burden on consumers’ wallets.

The Associated Press contributed to this report.

Gas prices reach record, ripple effect on economy feared