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How Gas Prices Impact the Economy

How Gas Prices Impact the Economy

March 11, 2022

According to data from GasBuddy, the average cost of a gallon of gas hit $4.104 on Monday, March 7, an all-time record. And we might not have seen the end of rising gas prices just yet. Analysts say prices could soar even higher. 

With gas prices rising, many of us are feeling a bit of a squeeze on our budgets. But how does the trend translate in the larger economy? 

It’s that shortfall in the individual’s budget that creates a ripple effect in the economy in general. Generally speaking, most of us regularly purchase a certain amount of gas out of necessity; we need to get to work and school. When we must spend more on gas, we have less to spend on other purchases, and begin to make sacrifices. 

But lowered spending on other items might mean that we eat in restaurants less often, purchase fewer optional items, and engage in entertainment or travel less frequently - and those are just a few examples. Other industries feel the pinch when customers come around less often. 

On top of that, online shopping tends to rise with the cost of gas. It makes sense that you might not want to drive 20 miles to the nearest mall. But that means delivery services are working harder and consuming more gas, and are therefore adding to the demand. 

And of course, higher gas prices can mean higher cost of transportation, which is then passed onto retailers who are forced to raise prices. And that can mean we see higher prices on everything from groceries to appliances. 

Hopefully, the resiliency we all learned during the pandemic will carry over to the current gas price crisis. But if you’re concerned about your own personal finances, we urge you to give us a call. We can help you evaluate your short-term and long-term financial plans, and then adjust your strategy if necessary.