In February, when US gas prices were about $ 3.50, most Americans said they would change their driving habits or lifestyle when gas reached $ 4. It now costs on average just under $ 5.
In the short term, high gasoline prices have led some people to become more conscientious about how often they drive. But for those who have to drive for work, either as a shuttle or as part of their job – such as health care workers, farmers, retailers and Uber and Lyft drivers – there is less winding space. For them, persistently high gas prices have far-reaching consequences that affect their home pay, where they live, and whether they will be able to do their jobs at all.
“If they are required to manage as a condition of their existence, they are stuck,” Mark Cohen, director of retail studies at Columbia Business School, told Recode. For those people, increased gas costs will come from their discretionary income, just as clothing and travel do. If they have a low income and had limited extra money to start with, it can mean much more difficult choices about food, housing and debt.
People who have a paycheck after a paycheck, “definitely see that it has a huge impact on what’s left in their wallet,” Cohen said.
In May this year, the average transaction price at gas stations was 34 percent higher than in May 2019, according to Earnest Research, a company that analyzes anonymous US credit and debit card data. And these charges take up a larger portion of people’s spending in the US.
For now, the bad news is that there is not much the government can do to adjust gas prices, as this is due to major global events beyond government control. When the pandemic stopped all kinds of travel in 2020 and the demand for gas fell as a result, oil companies closed refineries that process oil into gas – a step that is not easy to reverse quickly, even if the demand for gas in the US has grown again. In addition, the war between Ukraine and the major oil producer Russia has raised crude oil prices – which have been determined on a global basis. As a result, analysts expect gas prices to grow to $ 6 a liter this summer and remain high for some time.
The good news is that the current situation is quite a bit different from the gas crisis of the 1970s, which was characterized by cars running on gasoline and much greater foreign oil dependence. Nowadays, more of the money spent on gas remains within the US economy, and less of people’s salaries go to gas than back then. In addition, high gas prices may accelerate existing trends in the long run – buying more electric vehicles, living closer to work or working remotely – which will further disconnect us from the volatile fluctuations in gas prices.
In the meantime, there will be a lot of pain – especially for Americans who drive to make a living.
How high petrol prices affect those who drive for their livelihood
New research shows that demand for gas is more elastic – meaning demand is changing as prices rise – than previously thought. That said, it is most inelastic among people or small businesses that have no choice but to manage.
“They can become more efficient, they can pass it on to customers, or they can eat it,” says Adie Tomer, a senior fellow at Brookings Institution who is not profitable for public policy, leading his Metropolitan Infrastructure initiative.
Tianna Kennedy, owner of The 607 CSA, which supplies products, meat, dairy and other goods from farms in New York State to subscribers near and in New York City, is trying to make changes where she can.
The CSA is already cutting the gas mileage for its 40 member farms by consolidating their deliveries and bringing them to pick-up points where subscribers live. But part of the organization’s mission is to bring fresh food to low-income people in poorer, more remote neighborhoods in the Bronx and Eastern New York, rather than just richer areas in Manhattan and Brooklyn.
“We are deliberately inefficient,” Kennedy said. “It’s a lot of driving, so it’s getting very expensive.”
She does not want to increase the fees to farmers, who already do not make much on their goods, and she does not want to pass it on to customers, so she did not increase the prices of food shares. Kennedy is turning her business into a non-profit organization to try and make things work.
Others raise prices, but it’s a delicate dance.
Brian Stack, president of Stack Heating Cooling & Electric outside Cleveland, Ohio, says the gas bill for his store’s 40 trucks is now $ 20,000 a month – that’s double what it was in recent years – so he had to raise prices.
In addition to other inflation costs – he now pays fuel costs from his suppliers and has offered salary increases to workers to help them deal with that inflation – Stack said gas prices are eating away at the company’s profits. Service calls are often unscheduled and urgent – such as when someone’s heat does not work in the winter – so it is largely impossible to optimize routes for better gas kilometers.
“I need the trucks to generate revenue,” he said. “Without them, our affairs are out.”
Some people who drive for a living, such as truck drivers who work for large outfits or project managers who do site visits in their own cars, have company petrol cards or are paid or reimbursed based on gas spending, but this is not always the case. Uber and Lyft drivers usually have to take it on the chin.
This is bad news for the companies and the people who work for them.
In March, when gas was about $ 4 per liter, Lyft and Uber added small co-payments to each trip – 55 cents for Lyft, 45 to 55 cents for Uber – to help drivers offset gas prices, but the companies have not since fee does not increase. . Even then, the fee was not enough for drivers like Hector Castellanos.
“It’s an insult,” said Castellanos, who works in the Bay, where gas now costs nearly $ 7 a liter.
His Chevy Malibu gets about 30 miles per gallon, but he says the journeys are often long, upwards of 20 miles. This means the surcharge only helps with a small portion of the trip. Castellanos works 12-hour days where he earns about $ 300. After spending $ 120 a day on gasoline – but before car maintenance, insurance and cell phone costs – he earns $ 180. In an area with a very high cost of living, this means that he faces difficult decisions about what he can afford.
“Now we have to think about what we’re going to eat,” says Castellanos, who is currently applying for jobs in food service where he thinks he will make more. “Everything is so expensive.”
Other people who drive for work have nothing that mitigates their fuel costs.
Diondre Clarke, a Certified Nursing Assistant in Charlotte, North Carolina, uses her vehicle to drive to home care facilities and to deliver messages to a private client. Gas, which is more than $ 4.50 per gallon in Charlotte, comes from her own pocket.
“This gas really took a lot away from me,” Clarke told Recode. She makes $ 20 an hour, but says with inflation she is unable to save or pay off debt. “I am not able to do the things I wanted to do.”
High petrol prices also hurt those who simply have to drive to and from work. And it has the most impact on people who can afford it the least. Low-wage workers have already struggled to come up with the US minimum wage of $ 7.25 – an amount that can be wiped out with just a shuttle, especially in rural areas where travel times are long and public transportation is scarce.
What can – or, more likely, can not – be done
Inflation is politically very unpopular, and the petrol pump is one of the most obvious places where consumers notice it. But the government has very few levers to pull to help with gas prices, and some of the things the Biden administration does are more symbolic than effective.
The Federal Reserve has already raised interest rates, a painful process that seeks to slow spending by making loans more expensive, which is supposed to bring costs down. While this may help with demand, supply-side assistance is much more difficult as it is linked to refinery capacity and global oil prices (and geopolitical whims).
Biden has already released fuel from the country’s emergency stores, a move that has done little to improve gas prices, as it can not compensate for declines worldwide, where oil prices are set.
Biden announced Wednesday that he is also asking Congress to suspend federal gas taxes for three months. Some states have already suspended their gas taxes as well. But that state and federal tax is only responsible for 12 percent of the cost of gas.
“The price is already five dollars; 20 cents is not going to make a big difference, ”Kyle said, referring to how much federal tax per liter is.
On top of that, that tax will usually help pay for road and highway improvements – things that will eventually have to be paid for by other taxes.
Lutz Kilian, a senior economic policy adviser at the Federal Reserve Bank of Dallas, said such moves to lower gas prices could in fact have “perverse effects” on prices, because making gas cheaper could increase demand, which in turn prices will grow. “It can make things worse,” he said.
In the short term, many American workers will have to bear and bear the high price of gas. In the long run, they can make changes, which are not easy and will take time.
“In the short term, they have the car they have and they have the job they have,” said Steven Kyle, an associate professor at Cornell University’s Dyson School of Applied Economics and Management. In the longer term, these people may change jobs and move to different industries.
“We’re going to see those kinds of careers depopulate – people are going to leave if they can not afford the cost-income calculation,” Kyle said. “It will eventually make [employers] those people have to pay more, but all these things take a while to work out. ”
Those who can afford it can buy electric and fuel-efficient vehicles, though bottlenecks for EV supplies put a damper on this transition.
High gas prices can also have an impact on where people live, causing those who work personally to ensure they stay close to their jobs. It can also accelerate the demand for remote work. In April, 20 percent of posts on LinkedIn were in the U.S. for remote work, but they received more than half of all applications, according to the company. Those who come into the office two or three times a week may ask their bosses if they can come in once a week or even several times a month – especially since many office workers are not convinced that it is a point to enter the office. office. at all.
Early indicators suggest that high prices could start to stop people from charging for fuel, which in turn could help bring prices down: there were 5 percent fewer filling station transactions in May 2022 than in May 2019, according to Earnest Research and Energy Information Administration data show that the implied demand for gasoline in the week ending June 10 shrank slightly from a week earlier and from the same week a year earlier.
Even still, gas prices are expected to rise this summer and not fall significantly until 2023. And the longer gas prices remain high, the more drastic will be the changes that workers will have to make.