If the 2020s could be summed in one phrase, it would be "and then things got worse." Pandemic, political instability, war, inflation, and now many economists fear a recession is on the horizon. One of the major culprits for this recession-to-be is gas prices.
Jerry
has found that many Americans are considering buying an EV for the savings on fuel as well as looking for ways to save on car insurance
. But the sad truth is that most Americans can't afford to splurge on a new electric car. And like it or not, high fuel prices are likely to negatively impact everyone's quality of living. Explaining the surge of high gas prices
The knee-jerk reaction is to blame higher fuel prices on Putin's invasion of Ukraine. While the war has certainly impacted fuel prices, it is not the main culprit for skyrocketing gas prices in North America. Instead, it is much more related to the pandemic.
During the pandemic, demand for gasoline plummeted. With many Americans working from home and putting off any travel plans, the demand for gasoline reached historic lows. In turn, many gas suppliers curbed operations.
With most COVID-19 and travel restrictions being removed, Americans have a built-up hunger to hit the open road and fly the friendly skies. Summers typically see an increased demand for fuel-powered travel, but this summer will have an especially high demand given the last two years of the pandemic. While demand can instantly rise, supply cannot. The reality is that it will take oil companies time to bring production levels back to pre-pandemic output levels.
Different groups feel more pain at the pump
Like most economic factors in America, the economic hardship of higher gas prices will not be equally shared. Our internal data analytics
found that lower-income families will lose a larger amount of their after-tax income than other families. A family that earns $15,000-$30,000 will lose about 8.3% of their post-tax income at the pump when prices are at $4 a gallon. Conversely, a family that is in the $100,000-$149,999 income range will lose nearly half that amount at 4.4%. The disparity only magnifies as gas prices increase in price.
There is also a regionality aspect at play. As rural communities are more car-dependent and often have to drive longer distances for daily living, they will be more impacted by high fuel prices. When gas prices are at $4 dollars a gallon, a rural family is likely to spend 6.8% of their income on fuel, versus 4.2% of a family who lives in a city center.
Will this recreate a 2008-like recession?
Historically, when gas prices rise by more than 50 percent, a recession has followed, as reported by Bloomberg
. Our entire economy runs on gas, meaning that more expensive gas means more expensive everything. While a recession is imminent, the good news is that it probably won't be as bad as the Great Recession of 2008. After all, this isn't the first time America has experienced surging oil prices. Chances are we'll see a retracting economy, but not a full-blown economic disaster.
Protect your money with cheaper car insurance
No matter what you think the future economy will look like, you shouldn't be overpaying for car insurance. That's where Jerry
can help. A licensed broker, Jerry does all the hard work of finding cheap quotes from the top name-brand insurance companies and buying new car insurance. Jerry will even help you cancel your old policy. And to ensure you always have the lowest rate, Jerry will send you new quotes every time your policy comes up for renewal, so you're always getting the coverage you want at the best price.
4.7
