The average U.S. gasoline price hit a record high Tuesday as oil prices continue their surge. A key industry analyst says the move will prove costly for the average household.
According to AAA, the national average price of regular gas increased 11 cents a gallon from Monday to Tuesday, rising to a record $4.17 a gallon. That eclipses the previous record of $4.11 a gallon, set in July 2008.
Adjusted for inflation, however, the 2008 average price is equivalent to $5.37 a gallon in today’s dollars.
Even so, the sudden escalation in prices, triggered by worldwide sanctions on Russia, the world’s second-largest oil producer, is delivering a hammer blow to household budgets. In a research note published on LinkedIn, Edward Yardeni of Yardeni Research estimated that the rising price of oil will cost the average U.S. household an additional $2,000 to fill up their vehicles in 2022.
Impact beyond the gas pump
But the impact doesn’t end at the gas pump. Yardeni notes that rising fuel costs will spread throughout the economy, causing many businesses to raise prices.
“We estimate that the average household is currently spending at least $1,000 (seasonally adjusted annual rate) more on food as a result of rapidly rising grocery prices,” Yardeni wrote. “That’s $3,000 less money that households have to spend on other consumer goods and services, which also are experiencing rapid price increases.”
Economist Joel Naroff, of Naroff Economics, agrees that the surge in oil prices will have a ripple effect throughout the economy and will probably last for a while.
“Transportation costs rise so businesses pass those costs along to all their products, most of which have nothing to do with energy,” Naroff told ConsumerAffairs. “Sanctions are also making it harder to transport goods as airspace is affected and overland trucking and rail routes are being modified. The global supply chain is being challenged further as a result.”
Some regions affected more than others
A report released this month by Sen. Mike Lee (R-Utah) traces the rise in inflation and concludes that it will affect some areas of the U.S. more than others.
“Last year, the average inflation cost per household rose from roughly $100 in April 2021, when the annual inflation rate first started accelerating, to over $380 in January 2022 when it hit 7.5%,” the report by the Joint Economic Committee stated.
Americans in the Mountain region of Utah, Colorado, Arizona, New Mexico, Montana, Idaho, and Wyoming are expected to feel the effect of inflation the most, paying an extra $500 in household costs.
“Alternatively, those in the East South Central region, made up of Kentucky, Tennessee, Mississippi, and Alabama, are experiencing the lowest monthly inflation costs due to relatively lower inflation rates and average spending levels,” the authors wrote.