Record gas prices are pushing up daily costs and slowing economic recovery

John Millionlini, Vice President of Lakeville Trucks in Rochester, NY, said: About $ 400,000 a month. “What are your options? I’ve never seen a price so high and jump so fast.”

The company has 30 tractor trailers that transport general cargo and food, including groceries for the supermarket chain Wegmans, with each truck passing approximately 100 gallons of diesel daily.

Record high gas prices have surpassed pumps and permeated daily costs, adding new uncertainty to economic recovery.After the Biden administration took steps to ban Russia’s oil imports, prices reached $ 4.33 this week, threatening to boost short-term inflation prospects. Economic growth and spending, as well as restructuring employment patterns. Rising energy costs have complicated the Federal Reserve’s efforts to curb inflation, which has jumped to a new 40-year high this week.

Economists said rising prices and intensifying geopolitical crises could put a brake on the rapid recovery, Goldman Sachs said this week on the grounds of “rising oil prices” for US annual economic growth. He lowered his forecast and said there was a risk. The United States will enter recession next year.

But unlike the 1970s, when soaring oil prices caused years of decline, the underlying forces of the U.S. labor market, coupled with additional household savings and reduced dependence on oil, nations. May help protect against economic turmoil.

“Rising energy prices will weigh on US economic growth,” said Peter McLaley, economist at JP Morgan.

According to AAA, the average price of 1 gallon of gasoline this week has risen 13%. Overall gasoline prices have risen 38% from a year ago, according to the latest inflation rate from the Ministry of Labor.

Oil is already a premium from the pandemic, demand is high and supply is tight. The war in Ukraine only made the situation worse. (Lee Powell / The Washington Post)

The sudden jump creates new challenges for Dennis Coil, a landscaping operator in Morris County, New Jersey.

“My entire business is petrol-powered. Cars and trucks, lawn mowers, mowers, leaf blowers. A simple calculation is that if prices stay so high, this year’s fuel costs will be 20,000. From dollars to $ 40,000 .. “

Coyle, whose employees are driving Ford pickup trucks, has begun raising prices for some customers by $ 1 or $ 2 a week, but he says he’s wary of driving them away.

“In my type of business, if you raise the price of people, they will go somewhere. It’s really hard to know what to do,” said the 35-year-old.

According to JP Morgan analysts, personal consumption tends to decline as gas prices rise. For every 10% increase in gas and oil prices, consumers will have to spend an additional $ 23 billion annually to accommodate previous spending patterns. It also pushed up American bank accounts, leaving an additional $ 2.5 trillion savings to mitigate the blow.

“Oil price shocks don’t tend to have as serious an impact on the U.S. economy as they once did, but there are concerns not only about energy prices, but also about general inflation that leads to a recession,” he said. Researcher Harrison Fel said. A scholar at the Global Energy Policy Center at Columbia University. “There is still a lot of uncertainty about how things go.”

The recent rise in prices has already become a major problem for companies that are heavily dependent on fuel. For example, airlines typically spend about one-third of their cost on fuel, so soaring prices have a recognizable effect. , Some international airlines are already working on fuel surcharges to ticket prices. The Alaska Airlines Group has reduced flights by up to 5% in the first half of this year as a result of “rapid rises in fuel costs.” In this week’s corporate filing.

Also, many airlines fix low rates by “hedging” oil prices, basically promising future use, but major US airlines such as United Airlines and American Airlines. Airlines are not so, and are particularly vulnerable to fluctuations in energy costs. It is on the rise due to rising demand and rising jet fuel costs, but is likely to rise further in the coming months as the industry considers the latest energy shocks.

At the same time, rising gas prices can also lower consumer spending on travel and retail. Clothing chain Children’s Place executives said this week that “fluctuations around oil and gas prices and their impact on customers” benefited from last year’s federal stimulus, according to Jonathan Johnson. While surpassing it, it is eating up sales and profits. Meanwhile, online retailer Overstock.com is already paying a lot for ground transportation due to rising fuel costs.

“We feel it,” Johnson said.

David French, Senior Vice President of Government Relations at the National Retail Federation, said: group. “Last year, gas prices rose by more than $ 1 and this week alone rose by around 60 cents, which means that gas isn’t spending billions of dollars on other facilities. price.”

In addition to rising gas prices, soaring energy costs could reshape the US job mix and exacerbate labor shortages in certain industries, according to LinkedIn’s chief economist Guy Berger. If consumers start canceling their travel plans due to high prices, they can shrink for months.

Conversely, energy and mining companies whose employment is stagnant during a pandemic may see a resurgence in demand.

“If oil prices continue to rise, we will redistribute jobs across sectors and regions. To date, energy and mining have been one of the worst performing industries during covid, It may change soon. “

In Palestine, Texas, EasTex Solar increased its workforce by 30% last year to meet demand, according to owner Cal Morton.

He said the demand for solar panel installations with battery storage quadrupled in early 2021 after a severe winter storm disrupted most of the state for days.

“People in Texas are truly aware of energy prices and are beginning to realize that prices will never go down,” he said. He will have soaring energy prices because of the war, “he said.

Americans are already feeling the imminent tensions of rising gasoline prices, but it is still too early to judge their long-term economic implications. In one scenario, if Americans decide to withdraw in other ways, rising fuel costs will curb overall spending.

Lydia Ive, a mobile dog groomer in Edmond, Oklahoma, says she’s already begun to see its dynamic development: as she raises prices, some customers cancel the service altogether. I am.

Ibe is $ 10 to $ 50 more per booking to accommodate the rising costs of powering Dodge Ram’s pickup trucks, trailers, and generators to Clippers and blow dryers (counting $ 500 a week). I am billing.

The impact of rising energy costs on consumption may ultimately help curb inflation, but the uncertainty surrounding how long the war in Ukraine will last and how high oil prices will rise. Thinking about it, that’s a big deal.

“Gas prices have had a huge impact on me, so I have to charge more,” says Ibe, who started Splish Splash Mobile Dog Grooming six years ago. Those who are retired or living on bonds can no longer afford it. I have lost those customers. “

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