Americans are in shock with the surging prices at gas stations across the country. The global energy costs are now rippling through the economy following Russia's invasion of Ukraine, and the surges appear to be making inflation problems even worse.
John Migliorini, vice president of Lakeville Trucking in Rochester, New York, said that customers may not want to hear it, but with the fuel prices going through the roof, truckers have to charge more.
In his area, diesel costs have nearly doubled to about $400,000 a month. "What choice do we have? I've never seen prices jump this high, this fast," he said.
Migliorini's company, with its fleet of 30 tractor-trailers, transport general freight and food products, including groceries for Wegmans supermarket chains. With each truck going through around 100 gallons of diesel a day, their costs have been skyrocketing.
The Biden administration has taken steps to ban Russian oil imports, boosting the possibility of having higher short-term inflation that is threatening economic growth and spending as well as reshaping hiring patterns. (Related: Biden bans U.S. imports of Russian oil in ongoing war on AMERICAN consumers as gas prices skyrocket further.)
The gas prices are creating ripple effects as well, adding new uncertainty to the economic recovery. Gas prices hit the $4 last week and continually increased. In some areas, it is even higher, which is getting more and more painful for people with modest incomes, who have to commute or need to drive a lot.
Rising gas prices disproportionately hit the poor, working-class
Joe Brusuelas, the chief economist with Wall Street research firm RSM, said it's been a few generations since prices for many things have gone up all at once. "Rising prices will disproportionately hit poor, working-class, and middle-class Americans," he said.
Higher energy costs are also making it complicated for the Federal Reserve's efforts to rein in inflation, which is now at a new 40-year high.
Economists say that these rising prices and intensifying geopolitical crises could delay the rapid rebound. Goldman Sachs already lowered its forecast for annual U.S. economic growth, citing higher oil prices as the reason. It also noted that there is a risk the United States will enter a recession in the next year.
However, unlike in the 1970s when spiking oil prices triggered a years-long downturn, the U.S. labor market as well as extra household savings and reduced reliance on oil could help shield the country from further economic problems.
J.P. Morgan economist Peter McRory said that while the rise in energy prices will take a toll on the country's economic growth, overall, they are still looking for above-trend growth for the year.
AAA noted that the average price for a gallon of gas jumped 13 percent in the last week, while overall gasoline prices are up 38 percent from a year ago as per the labor department's data.
These sudden jumps are creating new challenges for businesses. Dennis Coyle, an owner of a landscaping business in Morris County, New Jersey, is already seeing problems develop. "My entire business runs on gas: cars and trucks, lawnmowers, weed whackers, leaf blowers. The simple math is that if prices stay this high, my fuel costs are going to go from $20,000 to $40,000 this year," he said.rep
Coyle's employees drive Ford pickups and have already begun raising the prices of some of his customers by $1 or $2 a week. (Related: Gas prices in California are rising so high they're about to beat the state's all-time record.)
Customer spending tends to fall when gas prices rise. Each 10 percent increase could mean that consumers will have to spend an additional $23 billion a year to keep up with earlier spending patterns, according to J.P. Morgan's analysts. However, the pandemic also boosted Americans' bank accounts, leaving them with an additional $2.5 trillion in savings to help cushion the blow.
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Watch the video below to learn how high gas prices can lead to more economic problems.
This video is from the Jeff Crouere channel on Brighteon.com.
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Sen. Cotton says gas prices will continue to rise, calls for deregulation of energy production in US.
Trump's 2020 prediction gas prices would reach $7 under Biden comes true.
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