In February, when US gas prices were around $ 3.50, most Americans said they would change their driving habits or lifestyle if gas hit $ 4. It now costs less than $ 5 on average.
In the short term, higher gas prices mean that some people are more conscientious about how often they drive. But for those who have to drive for work, travel or part of their job – health workers, farmers, businessmen and Uber and Lyft drivers – there is little room. For them, persistent high gas prices have long-term effects that affect their take-home pay, where they live and if they can manage their jobs.
“If they had to drive as their livelihood, they’d be stuck,” Mark Cohen, director of retail studies at Columbia Business School, told the Record. For such people, the increased gas costs come from their discretionary income, as well as clothing and travel. If they are low-income and have limited extra money to start with, that could mean more stringent choices about food, housing and debt.
People who live to pay by paycheck “are definitely seeing this have a huge impact on what’s left in their wallet,” Cohen said.
According to Earnest Research, which analyzes anonymous US credit and debit card data in May this year, the average transaction price at gas stations has increased by 34 percent since May 2019. And those charges are taking up a large share of people’s spending in the US.
At present, the bad news is that the government cannot do much to adjust gas prices due to large global events outside of government control. When the epidemic began to halt all sorts of travel in 2020 and demand for gas fell, oil companies shut down refineries refining gas – which is not as easy to return as gas demand. Grown back in the US. Additionally, the war between Ukraine and Russia, the major oil producer, has caused crude oil prices – set on a global basis – to skyrocket. As a result, analysts expect gas prices to grow to $ 6 a gallon this summer and remain high for some time.
The good news is that the current situation is somewhat different from the 1970s gas crisis, marked by gas-guzzling cars and high foreign oil dependence. Nowadays, most of the money spent on gas stays within the US economy, and people pay for less than what people pay checks. Additionally, in the long run, higher gas prices can accelerate existing trends – buying more electric vehicles, living closer to work or working remotely – which further separates us from the volatile swings of gas prices.
In the meantime, there will be a lot of pain – especially for Americans who are driving to make a living.
How high gas prices affect those who drive for their livelihood
New research shows that the demand for gas is more elastic – meaning that demand changes as prices rise – than previously thought. That said, it is extremely unstable in people or small businesses who have no choice but to drive.
“They can be more efficient, they can pass it on to customers, or they can eat it,” said Adi Tomer, a senior colleague at Brookings, a public policy nonprofit that leads the Metropolitan Infrastructure Initiative.
Tiana Kennedy, owner of The 607 CSA, which distributes products, meats, dairy and other goods from farms in upstate New York to nearby and New York City subscribers, is trying to make changes wherever possible.
CSA has already cut gas mileage for its 40 member farms, consolidates their deliveries and brings them to the pick-up points where subscribers reside. But it is part of the organization’s mission to bring fresh food to low-income people in the poorer, more remote neighborhoods in the Bronx and Eastern New York, rather than the affluent areas of Manhattan and Brooklyn.
“We were intentionally incapacitated,” Kennedy said. “It’s a lot of running, so it’s really expensive.”
They do not want to increase fees for farmers who have not already earned much on their goods and do not want to pass it on to consumers, so they have not increased food stock prices. Kennedy is in the process of turning his business into a nonprofit and is trying to work.
Others are raising prices, but this is a delicate dance.
Brian Stock, president of Stock Heating Cooling and Electric, outside of Cleveland, Ohio, said his store’s 40-truck gas bill is now $ 20,000 a month – more than doubled in recent years – so he had to raise prices.
In addition to other inflation costs – he is now paying fuel costs from his suppliers and offering salary increases to workers to combat those inflation – he said stock gas prices are eating up the company’s bottom line. Service calls are usually unspecified and urgent – when someone’s heat isn’t working in the winter – so it’s impossible to optimize routes for better gas mileage.
“I need trucks to earn income,” he said. “Without them, we’re out of business.”
Some people who drive for a living, truck drivers who work in big clothes, or project managers who visit the site in their own cars, have company gas cards or pay or reimburse gas costs, but that is not always the case. Uber and Lyft drivers, for the most part, have to take on the chin.
This is bad news for companies and the people who work for them.
In March, when gas was $ 4 a gallon, Lyft and Uber added small surcharges per trip – 55 cents to Lyft, 45 to 55 cents to Uber – to help drivers cover gas prices, but companies have not increased those fees. . Even then, drivers like Hector Castellanos weren’t paying enough.
“It’s a shame,” said Castellanos, who works in the Bay Area where the gas is now about $ 7 a gallon.
He says his Chevy Malibu gets about 30 miles per gallon, but tours are usually 20 miles long. That means the extra fee will only help a small part of the trip. Castellanos works a 12-hour day, where he makes about $ 300. After spending $ 120 a day on gas – but before car maintenance, insurance and cellphone expenses – they make $ 180. In an area with the highest cost of living, it means he has to make tough decisions about what he can afford.
“Now we have to think about what we’re going to eat,” said Castellanos, who is currently applying for jobs in food service, where he hopes to do more. “Everything is too expensive.”
Other people who drive for work have nothing to do with their fuel costs.
Deondre Clark, a certified nursing assistant in Charlotte, North Carolina, uses her vehicle to drive home care and work for a private client. In Charlotte, more than $ 4.50 a gallon of gas comes out of her own pocket.
“This gas has really taken a lot away from me,” Clark told the Record. She makes $ 20 an hour, but says she can’t save or pay off debt with inflation. “I’m not able to do the things I wanted to do.”
High gas prices are also troubling those who have to go to work. And it has a greater impact on people who can afford it less. Low-wage workers already had trouble making ends meet in the US $ 7.25 minimum wage – this can only be eliminated by travel, especially in rural areas where travel times are long and public transportation is rare.
What can – or, more often, cannot – be done
Inflation is not very popular politically and the gas pump is one of the most obvious places for consumers to notice it. But the government has very few levers to help with gas prices, and some of the work by the Biden administration is more symbolic than effective.
The Federal Reserve has already raised interest rates, a painful process that seeks to slow down spending by making debt more expensive, which reduces costs. While this may help with demand, it is very difficult to help supply as it is linked to refining capacity and global oil prices (and geopolitical aspirations).
Biden has already released fuel from the country’s emergency stores, which has done little to improve gas prices as it is unable to offset the global slump in oil prices.
On Wednesday, Biden announced he was asking Congress to suspend federal gas taxes for three months. Some states have already paused their gas tax. But those state and federal taxes are only about 12 percent of the cost of gas.
“The price is already five bucks; 20 cents isn’t going to make a big difference, ”Kyle said, referring to how many federal taxes per gallon.
Additionally, those taxes usually help pay for road and highway improvements – something that ultimately has to be paid through other taxes.
Lutz Killian, a senior economic policy adviser at the Federal Reserve Bank of Dallas, said that such measures of lowering gas prices could actually have “distorted effects” on prices because lowering the cost of gas increases demand, causing prices to rise. . “It can make things worse,” he said.
In the short term, many American workers grit and bear the high cost of gas. In the long run, they can make changes that are not easy and take time.
“In the short term, they own the car they own and the job they own,” said Steven Kyle, associate professor at Dyson School of Applied Economics and Management at Cornell University. In the long run, these people can switch jobs and go to different industries.
“We’re going to see those kinds of professions lose population – people will quit if they can’t afford the cost-revenue calculation,” Kyle said. “It does eventually [employers] Those people have to pay more, but all of this takes some time to work.
Although the transition to EV supply is hampering this transition, those who can afford it can buy electric and fuel-efficient vehicles.
High gas prices can affect where people live, thus making sure that those who work in-person live close to their jobs. This can accelerate the demand for remote work. In April, 20 percent of jobs on LinkedIn in the US were for remote work, but according to the company, they received more than half of all applications. Those who come to the office two or three times a week may ask their bosses if they can come in once or twice a week – especially when many office workers are not convinced that there is an element of going to the office. All.
According to the Earnest Research and Energy Information Administration, early indicators suggest that higher prices may help keep people from fueling, which could help keep prices down: gas station transactions were 5 percent lower in May 2022 than in May 2019. The data shows that the demand for gasoline in the week ending June 10 shrank slightly from the previous week and fell from the same week a year earlier.
Even still, gas prices are expected to rise this summer and will not drop significantly until 2023. And the longer gas prices are, the more drastic the changes that workers have to make.