Host Daniel Hurt stopped by a local Five Star gas station to speak with drivers. A woman who travels for work said gas prices had certainly already impacted both her budget and has led to some changes.
“I work on the road, so I cover about 15 counties and have to drive an hour and a half one way to go to these accounts. It really affects me. I mean, I've just filled up today for almost $60 from in my tank, and I'll fill my tank maybe two or three times a week,” she said. “So my husband and I, we've had to buckle our belts a little bit, do a little more home cooking and not eat out as much.”
She also said her job is impacted by the rising gas prices.
“I work in sales, the products that I sell have definitely gone up, which causes people not to purchase as much, which causes sales in the industry to go down,” she said. “It's not just financial either. It is also mental as well. I mean, working in sales, you get a high off of making those sales. But if people aren't purchasing and it just compounds on top of the budget and everything that you're working to figure out.”
Sam, who lives in Benton and works in Murray, says he has been impacted by the rise in gas prices as well. He said he has had to cut some family outings from his budget.
“Commuting to work from Murray to Benton is just a few miles, but that adds up compared to what I'm used to spending on a monthly basis. So the first thing I change is, we haven't been taking day trips. My wife and I, we try to find, like, a state park that we can drive to on the weekend. We're doing a little bit less of that,” he said. “Now grocery shopping looks a little bit different. I won't say that there's trade offs, but it definitely adds another layer to how we budget. It's something that we're having to actually talk about, as opposed to earlier, so we were feeling pretty good up until recently for obvious reasons.”
So why are prices as high as they are?
Hurt spoke with Murray State University associate professor of economics and finance Eran Guse about what’s causing gas prices to rise and how it will continue to impact consumers in areas beyond just the price of gasoline.
Guse said that, as you might think, the international conflict in the Middle East and U.S. military operations in Iran are a main cause of the increases. A very large percentage of the world’s oil trade travels through the Strait of Hormuz - the blockade of which causes demand to rise.
“When you block something like that, you have much less of it, right? With demand, and whenever there's a big reduction in supply, there's still the same amount of consumers who want to buy this oil, and so they have to fight over it,” said Guse. “And so they start bidding up the prices, and the prices go up. And so the oil prices naturally go up whenever there is some sort of a, what we call this a supply shock to the economy. And so this, this is what's driving up at least the oil price.”
Guse said that gas is an essential part of life and work for many people, which will force the consumers to make hard choices with their budget.
“You gotta have it. And so, in that case, you're going to have to make some decisions. If you're a relatively low income person, you're going to have to cut some stuff out, and that's going to be hard on you,” Guse said. “If you're a high income person, this is still a problem, because you may be putting less of your money into investments and stocks and bonds, and that can have an impact on the financial markets as well. So this is not just affecting the little guy, this is affecting everyone all across the board.”
Other “hidden” costs
But along with the cost rising to travel, grocery prices and other goods will increase as well, Guse said. He points out the cost of gasoline for truck drivers, for example, will require the cost of goods to rise.
“So your grocery prices are going to go up because most of what you find in stores are not locally produced. It has to be shipped from different places. And when you take a look at your own gas prices going up, consider that the price of diesel is far more expensive than four bucks a gallon. So that's another thing that when I look at my own budget. Now I have to cut out on these other things, and now they're more expensive, so I have to cut out more.
Guse said that gas prices can also impact energy costs, including electricity, along with heating and cooling.
“If oil doubles in price, you're going to expect to see gas prices going up, maybe not necessarily doubling, but it's going to be going up. In addition to this, this also pushes other energy prices up, because if oil is getting more expensive, we focus on other energies,” he said. “And so we'll see energy prices not only go up for having to drive around, you're also going to have your heating and cooling bills going up.”
Guse said while we do not know how long the war in the Middle East and controversy around the Strait of Hormuz will last, he hopes that the rise in prices will create opportunities for competition to bring down the prices.
As gas prices remain high, consumers will be forced to make changes. How is your budget being affected? Let us know here.
