How Surging Oil Prices Will Affect You Beyond the Gas Pump

“People are going to be trying to save money because of the higher prices that will be passed through, but some of these companies like Uber and Lyft will have to raise their prices,” said Joe Perry, market analyst at foreign-exchange broker Forex.com.

That’s occurring just as consumers are leaving their homes more — meeting friends at restaurants, seeing concerts, going to sports games — with Covid cases easing and the winter weather subsiding in many areas.

Many will opt for lower-cost modes of transport like public transit, but even buses and trains might not be immune to fare increases, especially since many of these vehicles run on diesel fuel, Perry said.

“I do think buses and trains will see a pickup especially with people going back to work,” Perry said. “They're not going to want to pay these extra funds to put gas in their car.”

Daily ridership on New York City’s subways rose 3% during the first week in March, while the transit systems in Washington, D.C., and San Francisco recorded 4% and 7% gains, respectively.

Groceries

Food prices are getting hit from multiple fronts. Labor shortages and supply-chain snarls had already pushed up food costs before the war, with one United Nations index near 2011’s all-time high. Average prices rose about 28% in 2021, the most in more than a decade.

Now, disruptions from Russia’s invasion of Ukraine are making matters worse, with the two countries accounting for more than a tenth of all calories traded globally and Russia also a key supplier of fertilizer. Global food costs rose to a record in February, up more than 50% since mid-2020.

Plus, higher oil prices mean it will cost farmers more to operate their equipment — diesel prices are at an all-time high — and to ship food around the world.

“In order for us to get anything it involves energy,” said Rob Haworth, senior investment strategy director for U.S. Bank Wealth Management. “Even for grocery stores, there's a delivery charge and you have to pay for it.”

Sometimes companies will absorb higher input costs when there’s a shock to the system, since raising prices can be more trouble than it’s worth, he said. But with a prolonged increase in costs, they may have no choice but to pass those on to customers.

Online Shopping

You might now have to think twice before stress-buying online after a long day at work.

If companies are paying more for inputs to make their products, they could react by hiking prices for their goods. Plus, shipping costs for the items to be delivered to your front door are likely to increase as well.

“Companies are paying for the manufacturing input, and after the good is produced how does that ultimately get transported to the consumers? It’s through the fuel costs of shipping or freight costs,” said Mindy Yu, director of investing at financial adviser Betterment. “Those are areas that we’re going to see aggregate inputs that companies pass onto consumers.”

U.S. online prices in February increased 3.6% from a year earlier to a new record high, according to data from software company Adobe Inc. That’s the 21st consecutive monthly increase and follows a record jump in November.

“The timing is unfortunate because it comes on top of what had already been fairly high rates of inflation, so it's kind of a double whammy,” said Christine Benz, director of personal finance at fund researcher Morningstar.

Beyond shipping costs, higher prices for plastic — which is made in part from crude oil — could lead to more expensive consumer items.

One key ingredient called resin notched an almost 28% increase in the year ended Jan. 31. This petrochemical is involved in items like toys, razor handles, grocery bags, milk jugs and more.

Higher costs for this crucial component could force companies to raise prices for their products. Clorox Co. said last month that higher prices for commodities comprise the majority of the inflation pressure it’s facing, and resins are the largest component of that.

Vacations

With Covid cases decreasing and vaccination rates rising, Americans are eager to take the trips they’d put off during the pandemic. Higher price tags might be an unwelcome companion.

Global airline capacity at the end of 2021 was 31% below 2019, but is expected to rise 47% in 2022 to meet rebounding demand, according to aviation consulting firm Cirium.

Even with the added capacity, airfares were expected to increase due to labor shortages and the airline industry’s efforts to reduce carbon emissions. Higher prices for fuel will only make that worse for vacationers traveling by air, as well as those going on cruises and train journeys. Jet fuel comprises between 20% to 25% of airlines’ annual operating expenses, according to data from Bloomberg Intelligence.

“Airlines are huge consumers of oil,” said Nela Richardson, chief economist for ADP. But price increases for customers will “depend on how companies are able to hedge that risk and how long oil prices stay elevated.”

Currently, domestic flights in the U.S. are averaging $300 roundtrip, up 36% from the beginning of 2022 and back in line with pre-pandemic levels, according to travel search engine Hopper Inc. For consumers already facing higher prices in most areas of their lives, that’s making it harder to afford those long-awaited vacations.

There’s the possibility that consumers eschew trips altogether to save money, said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

“If you live on a fairly tight budget, it starts to eat into your expendable money and takes away from discretionary spending,” he said.

Homes

Surging fuel prices are making it more expensive for average people to heat their homes, with electric bills doubling for U.S. families. In New York City, the average Consolidated Edison bill in January was $124 for those using 300 kilowatt-hours, a 23% increase from a year earlier.

But even beyond individual heating costs, the increase in oil prices may affect the U.S. housing market, which is still running hot.

Last year, the typical home increased almost 19% in value thanks to high demand and a shortage of supply. Building new homes is also becoming more expensive because of labor costs and higher prices for raw materials like lumber. Increased shipping costs will likely make the problem even worse.

Plus, the equipment used to build new homes requires energy, and when that costs more, builders can charge more for construction.

Eli Frederick, a 28-year-old in Wilmington, North Carolina, flips homes for a living and is already thinking about how higher energy costs will affect his livelihood.

“I’m worried that the cost of working with contractors will go up because they will be paying more for gas to drive to property sites,” he said. "This will affect everyone who has to leave the house.

Before the last six months, I would never even look at the price of gas. I'm thinking differently now."

Bloomberg News provided this article. For more articles like this please visit bloomberg.com.

Read more articles by Claire Ballentine