Gas Prices Near $5 a Gallon, as Record Fuel Costs, Upend U.S. Economy, Businesses

As gasoline prices in the U.S. reached a new high of over $5 per gallon, fuel costs are making ripples through every corner of business. Signs have emerged that rising prices have begun to alter consumer behavior.

The continuous climb in prices comes as the U.S. economy struggles to recover from the pandemic, setting off pent-up demand for travel, both by air and road, and many workers returning to their pre-pandemic commutes.

Prices of diesel, jet fuel, and gasoline continue to increase as fuel and oil production hasn’t increased rapidly enough to meet growing global demand. Instead of improving, U.S. fuel-making capacity has declined because of refinery closures.

Results of the soaring gas prices are being widely felt — from autos to service stations and retail stores, airlines, trucking industries, food, and the gas-and-oil business. The struggling economy, including inflation alongside soaring prices, may have potential political consequences for Democrats and President Biden as they seek to maintain control of Congress in November’s midterm elections.

According to economists and analysts, record gas prices threaten to curb some of the fuel demand. They say drivers now buy fewer gallons of lie on each gas station visit. According to economists, the surge in fuel prices is a huge factor in overall inflation, which has reached a 40-year high.

Corporations and businesses struggle under the weight of fuel costs

Airlines are grappling with the highest jet fuel prices, adjusted for inflation, since January 2009, according to the trade group, Airlines for America. This summer, strong domestic flight bookings have helped many U.S. carriers cover the higher fuel prices by increased fares. Airline fares are up 33.3% from a year ago, rising 18.6% between March and April.

According to Bob Nelson, Costco’s senior vice president of investor relations, “We have a lot more members coming by and topping off their tank. And those members will come by to buy five or six gallons and then be on their way.” Nelson spoke during a company earnings call where consumers’ frequent visits to buy smaller amounts were discussed. This could create more opportunities for some retailers to grab market share.

The auto industry is sensitive to fluctuations in gasoline prices because fuel costs are a critical factor in purchase decisions. According to executives and analysts, consumer preferences are starting to shift, with more car shoppers looking to help keep their energy bills in check by prioritizing fuel economy and looking at hybrids or electric vehicles.

According to Kelley Blue Book and Inc, online searches for electric vehicles have climbed 73% since January. Online shoppers’ interest in hybrid cars also rose 25% in the same time frame.
Soaring diesel prices are raising worries at transportation and trucking companies. Some of the concerns include whether rising shipping costs could cause a reduction in demand if retailers cut short restocking efforts and construction projects are pushed off.

According to Dean Croke, principal analyst at DAT Solutions, a marketplace for the trucking industry that matches loads to appropriate trucks, “It’s hurting a lot of carriers, and it’s hurting the smaller carriers the most.”

Many analysts predict that as demand grows during the summer driving season and no fixes for increasing supplies are on the horizon; prices could climb higher. Gas prices are expected to reach a national average of $6.20 per gallon by August, according to estimates by JPMorgan Chase.

President Joe Biden’s approval rating has dipped to its lowest level in his presidency. According to a new poll, deepening pessimism has emerged among fellow members of his Democratic Party. The Associated Press-NORC Center for Public Research poll showed that only 39% of U.S. adults approve of Biden’s job performance. The number is a dip from already negative ratings the previous month.

The poll’s findings reflect a widespread sense of frustration in the country. The U.S. faces a cascade of challenges, from gun violence, a spreading baby formula shortage, and raging inflation, to the lingering pandemic.