All You Need to Know about Surging Commodity Prices and Hacks to Lessen the Stress on Your Wallet
Brooke is a freelancer who focuses on the financial wellness and technology sectors. She has a passion for all things wellness and spends her days cooking up healthy recipes, running, and snuggling up with a good book and her fur babies.Read full bio
The COVID-19 pandemic has left a lot of unanticipated consequences in its wake. And perhaps the one Americans are feeling most right now is rising commodity prices. From the cost of groceries and eating out to rising gas prices, it seems like most commodities have been impacted by recent inflation. And that means American consumers are spending more on the same essentials and coming out of each month with less cash in their pockets. But since these price hikes are happening across the country, is there really anything the average consumer can do to combat it?
Rising Inflation and the Impact on Consumers
Price increases have been felt the most when it comes to commodities we use every day. Basic needs like groceries are spiking in price. According to the Bureau of Labor Statistics Consumer Price Index, the cost of food at home saw an increase of 4.5% over the past year. And the index for meat, poultry, fish, and eggs went up by a staggering 10.5% since last year.
Supply chain issues and labor shortages are the reason behind some commodity price increases while others have been driven up by pure supply and demand economics. Take US gas prices, for example. American drivers are seeing some of the highest gas prices ever at the pump. And some of the reason behind that is because gas supply simply can’t keep up with demand. But there’s far more to the story, including ways consumers can save money as surging gas prices continue.
Why are Gas Prices Going Up?
Many people are wondering what’s really at play behind gas prices going up and who is in control. It turns out, there are four main factors that determine the average price of gas.
- Crude oil prices: Crude oil is the main component of the gasoline we use in cars. And it contributes to about 70% of the gas price per gallon. On November 3, 2021, the price of a barrel of crude oil was $81.20. Compare that to $37.66 on November 3, 2020. Like other commodities, crude oil prices are subject to supply and demand fluctuations. And the bad news for consumers is that oil futures predict the price will hang above $80 for the coming months.
- Taxes: Tax-savvy millennials may already know that federal, state, and local governments all charge a tax that contributes to what you pay at the pump. And each state sets its own gas taxes, which account for inflated prices in some states. For example, California has the highest gas tax at $.66 per gallon.
- Distribution and marketing: The fuel station where you buy gas needs to pay to run their business. So they’ll need to make enough money to cover employee wages, rent payments, insurance, state fees, etc. These prices can vary per station and explain why you can be at an intersection with three gas stations and note a difference in price between them.
- Corporate profits and refining: The gas that goes into the tank of your car needs to be refined and is often mixed with other ingredients during processing. The price of those inputs varies based on the season and region where the refining is happening. The refining companies also need to make a profit, which influences prices too.
According to AAA, the average US gas price on November 3 was $3.40 per gallon. But many states, specifically those on the west coast, are seeing gas prices rising well above $4, with California’s average at $4.61.
As prices surge higher, drivers wonder how to make ends meet and pursue other financial goals like debt repayment when they have to pay tens or hundreds of dollars more each month. In fact, American drivers who are used to paying around $185 per month on gas may now be facing a new monthly cost of around $292. That’s over a $100 increase!
Unfortunately, the everyday driver has no control over what’s happening in the crude oil market. But that doesn’t mean you can’t control where you buy gas and take other initiatives to lower the cost.
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Ways Consumers Can Combat the Gas Price Increase
At a time where gas prices in some states are up to 63% higher than they were last year, paying as little as possible per gallon is on everyone’s radar. And there are a few ways to save every time you pull up to the pump.
Use the right credit card for maximum cashback on gas
Savvy consumers have been reaping the rewards of credit cards for years. But certain cards are really stepping up to the plate when it comes to offering big savings on gas purchases. For example, some Citi credit cards offer cardholders savings of anywhere from 3-5% on gas, depending on the card.
For example, wholesale customers filling up with the Sam’s Club Mastercard could save 5% on the first $6,000 in gas purchases per year. That’s a whopping $175 each year, equating to 14% of the gas expense increase. With savings like that, finding the right cashback credit card is a no-brainer.
Use apps to find the lowest prices
Apps like GasBuddy can help you find the lowest gas prices around you. And using an app can be especially helpful when holiday travels take you far from your usual spots. Plus, some apps will even offer you cashback by simply telling the app where you’re fueling up and at what price. That means even more savings per gallon. Other personal finance apps can help you create a budget and be sure you’ll be setting aside an appropriate amount each month for gas purchases.
Tips to Conserve Fuel
While gas prices are out of your control, there are ways to change your driving habits to help conserve as much fuel as possible.
1. Accelerate and stop slowly
Driving your car hard with frequent fast acceleration and stops is more taxing on your gas supply. Slow accelerations to a steady speed followed by coasting decelerations are the most fuel-efficient way to get from A to B.
2. Plan efficient holiday travel routes
Travel apps can help you plan the most fuel-efficient routes. Apps may also help you avoid traffic jams where the constant stop and go can wreak havoc on your gas mileage. You can also plan to travel with extended family if you’re heading to the same destination. Carpooling or taking fewer vehicles means instant fuel savings when you split the cost among more passengers.
3. Use heat wisely
Some people like to turn the car on and crank up the heat for a few minutes before heading out. But this creature comfort may cause your gas gauge to tick down quicker. Instead, throw on an extra layer and wait to turn the heat on until you’re on the road. If you’re able to park in a garage during the winter months, that can help keep your car at a more reasonable temperature, too, so you won’t need as much heat when you hop in.
The Bottom Line
The current gas price increase appears to be here to stay through the holiday season. And that means drivers need to be smart about where and how they’ll purchase gas and how to drive to get the most out of each tank. Finding the right cash back credit card for gas purchases and using travel apps can help create the most seamless and inexpensive travel experience this season. And that means you can focus on spending time with loved ones, not how much lighter your wallet will be when you get there.