High gas prices harm workers.  Don’t expect cheap gasoline anytime soon.

High gas prices harm workers. Don’t expect cheap gasoline anytime soon.

Back in February, when gas prices in the US were around $ 3.50, most The Americans said they would change their driving habits or lifestyle if gasoline reached $ 4. Now it costs a little less $ 5 on average.

In the short term, high gasoline prices have led some people to become more conscientious about how often they drive. But for those who have to drive to work, whether traveling to work or as part of their job – such as healthcare workers, farmers, dealers and Uber and Lyft drivers – there is less room to move. For them, persistently high gas prices have long-term consequences that affect their pay, where they live and whether they will be able to do their job at all.

“If they’re asked to drive as a living condition, they’re stuck,” Mark Cohen, director of retail studies at Columbia Business School, told Recode. For these people, increased gas costs will result from discretionary income, in the same way that clothing and travel do. If they have low incomes and have limited extra money to start with, it can mean much harder choices about food, housing and debt.

“People who live from paycheck to paycheck definitely see that this has a huge impact on what’s left in their wallets,” Cohen said.

In May this year, the average transaction price at gas stations increased by 34 percent compared to May 2019. Earnest Research, a company that analyzes anonymized U.S. credit and debit card data. And those costs account for the bulk of people’s spending in the U.S..

For now, the bad news is that the government can’t do much to adjust gas prices because they are due to major global events beyond government control. When the 2020 pandemic began to halt travel of all kinds and therefore gas demand declined, oil companies closed oil-to-gas refineries – a move that is not easy to reverse quickly, even when U.S. gas demand is rose again. In addition, the war between Ukraine and Russia’s largest oil producer has led to a jump in crude oil prices – which are set on a global basis. As a result, analysts expect gas prices will rise to $ 6 a gallon this summer and remain high for some time to come.

The good news is that the current situation is quite different from the gas crisis of the 1970s, which was marked by cars swallowing gas and much greater reliance on foreign oil. These days, more money spent on gas remains in the American economy, and less people’s salaries go on gas than then. In addition, in the long run, high gas prices could accelerate existing trends – buying more electric vehicles, living closer to work or working remotely – which would further separate us from changing gas price changes.

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

How high gas prices affect those who drive for a living

New research shows that gas demand is more resilient – meaning that demand changes as prices rise – than previously thought. However, it is most inelastic among people or small businesses that have no choice but to drive.

“They could become more efficient, they could pass it on to customers, or they could eat,” said Adie Tomer, a senior fellow at the public nonprofit Brookings Institution that runs its Metropolitan Infrastructure Initiative.

Tianna Kennedy, owner 607 CSAwhich supplies products, meat, dairy and other goods from farms in the northern state of New York to subscribers nearby and in New York, is trying to make changes where it can.

The CSA is already reducing gas mileage for its 40 member farms by consolidating their deliveries and bringing them to pick-up 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 neighborhoods of the Bronx and eastern New York, not just the richer areas of Manhattan and Brooklyn.

“We’re intentionally inefficient,” Kennedy said. “It’s a lot of driving, so it’s getting really expensive.”

She does not want to raise fees for farmers, who do not earn much on their goods anyway, and she does not want to pass on to customers, so she did not raise food stock prices. Kennedy is in the process of transitioning his business to a nonprofit to try to make things work.

A pedestrian is silhouetted on a gas station sign showing prices close to $ 8 a gallon in Los Angeles, California, on June 16th.
Jae C. Hong / AP

Others raise prices, but it’s a delicate dance.

Brian Stack, president Stack Heating, Cooling and Electricity outside of Cleveland, Ohio, he says the gas bill for the 40 trucks of his store is now $ 20,000 a month – twice as much as it has been in recent years – so he had to raise prices.

In addition to other inflation costs – he now pays fuel costs from his suppliers and has offered wage increases to workers to help them cope with that inflation – Stack said gas prices are eating away at the company’s end result. Service calls are often unplanned and urgent – like when someone’s heating doesn’t work in the winter – so it’s generally impossible to optimize routes for better fuel mileage.

“I need trucks to make money,” he said. “Without them, we are out of work.”

Some people who drive for a living, such as truck drivers who work for large companies or project managers who visit construction sites in their cars, have company fuel cards or are paid or reimbursed based on fuel consumption, but this is not always the case. Uber and Lyft drivers, for the most part, have to accept that on their chin.

This is bad news for companies and the people who work for them.

In March, when gasoline cost about $ 4 a gallon, Elevator i Uber they added small extras to each trip – 55 cents for Lyft, 45 to 55 cents for Uber – to help drivers recoup fuel prices, but companies have not raised that fee since. Even then, the fee was not enough for drivers like Hector Castellanos.

“It’s an insult,” said Castellanos, who works in the Gulf area where gas now costs nearly $ 7 a gallon.

His Chevy Malibu exceeds about 30 miles per gallon, but says trips are often long, more than 20 miles. This means that the surcharge only helps for a small part of the trip. Castellanos works 12 hours a day and earns about $ 300. After spending $ 120 a day on gasoline – but before the cost of car maintenance, insurance and a cell phone – he earns $ 180. In an area with a very high cost of living, this means that he is facing difficult decisions about what he can afford.

“Now we need to think about what we are going to eat,” said Castellanos, who is currently applying for a job at a restaurant where he thinks he will earn more. “Everything is so expensive.”

Other people who drive to work have nothing to reduce their fuel costs.

Diondre Clarke, a certified nurse in Charlotte, North Carolina, uses her vehicle to drive to home care facilities and do business for a private client. Gasoline, which is more than $ 4.50 a gallon in Charlotte, is coming out of her pocket.

“This gas has really taken a lot away from me,” Clarke told Recode. She earns $ 20 an hour, but says she can’t save or repay the debt because of inflation. “I’m not able to do the things I wanted to do.”

High gasoline prices also hurt those who simply have to drive to and from work. And it affects people the most who can afford it the least. Low-wage workers have already had trouble making ends meet with a U.S. minimum wage of $ 7.25 – an amount that can only be wiped out by commuting, especially in rural areas where travel time is long and public transportation is scarce. .

What can – or, more likely, cannot – be done

Inflation is politically very unpopular, and the gas station is one of the most obvious places where consumers notice it. But the government did very few pull levers help with gas prices, and some of the things the Biden administration does are more symbolic than effective.

The Federal Reserve has already raised interest rates, and painful process which tries to slow down consumption by making borrowing more expensive, which should reduce costs. While this could help demand, aid supply is much more difficult because it is related to refinery capacity and global oil prices (and geopolitical whims).

Biden has already released fuel from the country’s emergency storage, a move that hasn’t made a small improvement in gas prices because it can’t make up for the drop globally, where oil prices are determined.

Wednesday, Biden announced he also asks Congress to suspend federal gas taxes for three months. Some countries have already paused gas taxes. But those state and federal taxes make up only 12 percent of the price of gas.

“The price is already five dollars; 20 cents won’t make much of a difference, “said Kyle, referring to that how much are federal taxes per gallon.

High gas prices harm workers.  Don’t expect cheap gasoline anytime soon.

President Joe Biden called on Congress to temporarily suspend federal gas taxes while speaking at the White House on June 22.
Drew Angerer / Getty Images

In addition, these taxes would usually help pay for road and highway improvements – things that will eventually have to be paid through other taxes.

Lutz Kilian, a senior economic policy adviser at the Federal Reserve Bank of Dallas, said such moves toward lowering gas prices could actually have “perverse effects” on prices because lowering gas prices could increase demand, which in turn would cause prices to rise. “It could make things worse,” he said.

In the short term, many American workers will have to endure and bear the high price of gas. In the long run, they could make changes, which are not easy and will take time.

“In the short term, they have a car that they have and a job that they have,” Steven Kyle, an associate professor at Cornell University’s Dyson School of Applied Economics and Management. In the long run, these people could change jobs and move into different industries.

“We’ll see these types of professions disappear – people will leave if they can’t afford a cost and income budget,” Kyle said. “It simply came to our notice then [employers] they have to pay these people more, but all these things take some time to pass. ”

Those who can afford it could buy electric and economical vehicles, although bottlenecks to supply electric vehicles are slowing this transition.

High gas prices can also affect where people live, causing those who work personally to ensure they live close to their jobs. It could also accelerate the demand for teleworking. In April, 20 percent of jobs on LinkedIn in the U.S. were for telecommuting, but they received more than half of all applications, according to the company. Those who come to the office two or three times a week could ask their bosses if they could come once a week or even several times a month – especially since many office workers are not convinced it makes sense to go to the office at all.

Early indicators suggest that high prices could start to prevent people from starting to refuel, which in turn could help lower prices: there were 5 percent fewer gas station transactions in May 2022 than in May 2019, according to Earnest Research, and Energy Information Administration the data show that the implied demand for gasoline in the week ending June 10 was slightly reduced compared to the week before and compared to the same week a year earlier.

Still, gas prices are expected to rise this summer rather than fall significantly by 2023. And the longer gas prices remain high, the more drastic changes workers will have to make.

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