High oil prices are hurting workers. Don’t expect cheap gas anytime soon.

Back in February, when U.S. gasoline was around $3.50, most american says If gas prices hit $4, they would change their driving habits or lifestyle.Now it costs a little less than 5 USD generally.

In the short term, high gas prices mean some people are becoming more cautious about how often they drive. But for those who have to drive to work, either as a commute or as part of a job — such as health care workers, farmers, businessmen, Uber and Lyft drivers — they have even less leeway. For them, persistently high gas prices affect their take home wages, where they live and whether they can do their jobs.

“If they need to drive as a condition of making a living, they’re in a bind,” Mark Cohen, director of retail studies at Columbia Business School, told Recode. For these people, the increased cost of gasoline will come from their discretionary Income, like clothes and travel. If they are low-income earners and have limited additional funds to begin with, that could mean tougher choices about food, housing and debt.

Those living on paychecks “will definitely see a huge impact on what’s left in their wallets,” Cohen said.

According to the data, in May this year, the average transaction price at gas stations increased by 34% compared to May 2019. research seriously, a company that analyzes anonymous U.S. credit and debit card data. These costs represent an ever-increasing proportion of the American public’s spending.

Right now, the bad news is that there’s nothing the government can do to adjust petrol prices because they are Due to large global events beyond the control of the government. When the 2020 pandemic began to bring all kinds of travel to a standstill and demand for natural gas plummeted as a result, oil companies shut down refineries that process oil into natural gas — a move that wasn’t easy to reverse quickly, even as demand for natural gas plummeted It has grown again in the United States. In addition, the war between Ukraine and major oil producer Russia has caused crude oil prices – which are determined globally – to soar. therefore, Analysts expect Gasoline prices will rise to $6 a gallon this summer and remain high for some time.

The good news is that the current situation is very different from the gas crisis of the 1970s, which was characterized by gas-guzzling cars and a higher dependence on foreign oil. More of the money spent on gas is staying in the U.S. economy these days, and people are spending less on gas than they did back then. Also, in the long run, high oil prices could accelerate existing trends—buying more electric vehicles, living closer to work, or working remotely—that would take us further away from oil price volatility.

In the meantime, there will be a lot of pain — especially for Americans who drive for a living.

How high gas prices affect those who drive for a living

new research Shows that demand for natural gas is more resilient than previously thought – meaning that demand does move with price increases. That said, it’s the least resilient among people or small businesses that have no choice but to drive.

“They can make it more efficient, they can pass it on to their customers, or they can eat it,” said Adie Tomer, senior fellow at the Brookings Institution, a public policy nonprofit, and director of the Metropolitan Infrastructure Program. .

Tiana Kennedy, owner 607 CSAwhich delivers produce, meat, dairy and other goods from farms in upstate New York to nearby and New York City users, and is trying to make changes where possible.

CSA has already reduced gas mileage on its 40 member farms by consolidating their deliveries and taking them to pickup points where subscribers live. But part of the organization’s mission is to bring fresh food to low-income people in the poorer, more remote areas of the Bronx and eastern New York, not just the wealthier parts of Manhattan and Brooklyn.

“We are intentionally inefficient,” Kennedy said. “There’s a lot of driving, so it’s really expensive.”

She didn’t want to raise fees for farmers, whose products were already unprofitable, and she didn’t want to pass the money on to customers, so she didn’t raise the price of food stocks. Kennedy is turning her business into a nonprofit to try and keep things running smoothly.

A pedestrian is silhouetted against a sign at a gas station where prices are approaching $8 a gallon in Los Angeles, California, on June 16.
Jae C. Hong/Associated Press

Others are raising prices, but it’s a delicate dance.

Brian Stark, President Stack Heating Cooling and Electrical Outside Cleveland, Ohio, he said gas costs for 40 trucks at his store are now $20,000 a month — double what they were in recent years — so he had to raise prices.

In addition to other inflationary costs — he now pays for fuel from suppliers and offers workers pay rises to help them deal with inflation — Stark said gas prices are eating into the company’s bottom line. Service calls are often unscheduled and urgent — like when someone’s heating isn’t working in the winter — so it’s basically impossible to optimize routes for better fuel consumption.

“I need trucks to generate income,” he said. “Without them, we’d be broke.”

Some people who drive for a living, such as truck drivers who work for large agencies or project managers who do field trips in their own cars, have a company gas card or get paid or reimbursed based on gas fees, but this is not always the case. In most cases, Uber and Lyft drivers have to live with it.

That’s bad news for companies and the people who work for them.

In March, when gas prices were around $4 a gallon, Lyft and Uber A small surcharge — 55 cents for Lyft and 45 to 55 cents for Uber — was charged on each trip to help drivers offset gas prices, but the companies have not raised that fee since. Even so, the fee is not enough for drivers like Hector Castellanos.

“It’s an insult,” said Castellanos, who works in the Bay Area where gas prices are approaching $7 a gallon.

His Chevrolet Malibu gets about 30 miles per gallon, but he says the range is usually long, more than 20 miles. This means that surcharges are only helpful for a small portion of itineraries. Castellanos works 12 hours a day and earns about $300. After spending $120 a day on gas — but before car repairs, insurance and cell phone bills — he made $180. In an area where the cost of living is very high, that means he faces difficult decisions about what he can afford.

“Now we need to think about what to eat,” said Castellanos, who is currently applying for food service jobs where he thinks he’ll make more. “Everything is so expensive.”

Others who drive to work have no way of reducing their fuel costs.

Diondre Clarke is a certified nursing assistant in Charlotte, North Carolina, who uses her vehicle to drive to home care agencies and run errands for private clients. Gas is over $4.50 a gallon in Charlotte and she pays for it out of her own pocket.

“This gas really cost me a lot,” Clark told Recode. She makes $20 an hour, but because of inflation, she can’t save or pay off her debt. “I can’t do what I want to do.”

High gas prices are also hurting those who only need to drive to and from get off work. It affects those who can afford it the most. Low-wage workers are already struggling to make ends meet on the U.S. minimum wage of $7.25 — an amount that can be eliminated with just a commute, especially in rural areas with long travel times and little public transportation.

what can – or more likely cannot – do

Inflation is very politically unpopular, and gas stations are one of the places consumers notice the most.But the government has few levers to pull Help gas prices rise, while some of the things a Biden administration is doing are more symbolic than effective.

The Fed has raised interest rates, painful process It tries to slow spending by raising borrowing costs, which should bring down costs. While that may help boost demand, boosting supply is much harder because it has to do with refinery capacity and global oil prices (and geopolitical whims).

Biden has already released fuel from the country’s emergency reserves, a move that has done little to improve natural gas prices because it can’t make up for a drop in global oil prices.

Biden on Wednesday Announce He also asked Congress to suspend the federal gasoline tax for three months. Some states have also suspended gas taxes. But these state and federal taxes account for only 12 percent of the cost of natural gas.

“The price is already five bucks; 20 cents wouldn’t make a big difference,” said Kyle, referring to how much federal tax per gallon.

Speaking at the White House on June 22, President Joe Biden called on Congress to suspend the federal gas tax.
Drew Angler/Getty Images

In addition, these taxes often help pay for road and highway improvements — costs that must ultimately be paid for through other taxes.

Lutz Kilian, senior economic policy adviser at the Federal Reserve Bank of Dallas, said such a move to lower natural gas prices could actually have an “adverse effect” on prices, as lower natural gas prices could increase demand and, in turn, lead to higher prices. Things got worse,” he said.

In the short term, many American workers will have to put up with high gas prices. In the long run, they can make changes, which are not easy and take time.

“In the short term, they own their own cars, they own their own jobs,” said Steven Kell, an associate professor at Cornell University’s Dyson School of Applied Economics and Management. In the long term, these people can switch jobs and move to different industry.

“We’re going to see a decrease in the population of these types of occupations — if they can’t afford the cost-income calculation, people will leave,” says Kyle. “This will eventually make [employers] These people have to be paid more money, but all these things will take a while to work out. “

Those who can afford it can buy electric and fuel-efficient vehicles, although bottlenecks in EV supply are preventing the transition.

High oil prices can also affect where people live, leading those who work in person to ensure they live close to where they work. It could also accelerate demand for remote work. In April, 20 percent of jobs on LinkedIn in the U.S. were remote, but they received more than half of the applications, according to the company.Those who come to the office two or three times a week may ask their boss if they can come once a week, or even a few times a month—especially because Many office workers are not convinced It makes sense to enter the office.

Early indicators suggest that high prices may start to deter people from filling up, which in turn may help drive prices down: According to Earnest Research, gas station transactions in May 2022 were 5% lower than in May 2019, and Energy Information Administration Implied demand for gasoline for the week ended June 10 was down slightly from the previous week and the same time last year, the data showed.

Even so, natural gas prices are expected to rise this summer and not fall significantly until then 2023. The longer gas prices stay high, the more dramatic the changes workers must make.

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