How Much Does $5 a Gallon Gas Actually Impact Your Budget?
For most Americans, increased gas prices are having a significant impact on their household expenses.
This summer, national gasoline prices hovered around the $5 per gallon level, a serious sticker shock to many drivers each time they fill up a vehicle.
With fuel prices 44% higher than 12 months ago, what does $5 for a gallon of gas mean for Americans economically? Here's a dive into the impact high-priced gasoline has on drivers' wallets.
How Does $5 Gas Impact Your Household Budget?
According to U.S. Department of Energy data, the average car gets 24 miles per gallon, with trucks and sport-utility vehicles falling below 18 mpg. In a given month, most people drive about 1,100 miles (or roughly 13,500 miles per year).
In 2019, the average fuel price was $2.60 per gallon, which means if you owned a car, you were paying $119 on average to cover your monthly fuel expenses and $163 as a truck or SUV owner. At $5 per gallon, that same amount of driving would cost $229 and $314, respectively, an added cost of between $110 and $151 a month at the fuel pump.
Over the year, that means an additional expense of $1,320 for the average car owner and a whopping $1,852 for those driving trucks and SUVs.
Higher Gas Prices are Fueling Higher Overall Living Costs
Not only do higher gas prices directly contribute to the real money being paid out by drivers every month, but it also feeds into the price increases associated with nearly every other product as the cost of transporting consumer goods to the shelves continues to rise. These rising inflation rates have pushed the cost of living up almost across the board.
Food, shelter, and utilities feed into a consumer price index in July 2022 of 8.6% higher than a year ago. How does this translate in terms of real dollars? A Bloomberg report pegs the additional cost for a household living 2021's lifestyle in 2022 will be $5,200, or $433 extra per month.
That's more than enough money to overstretch a family budget. According to a recent study by Bankrate, over half of Americans don't have enough savings in the bank to cover a one-time emergency expense of $1,000 in an economic climate where it's now necessary to come up with over five times that amount just to make it through the year. Lower-income households will increasingly be forced to turn to credit cards, loans, and other debt simply to make ends meet, just as lending rates are also starting to increase.
Will Gas Prices Drop?
Complex global circumstances govern the cost of gasoline here in the U.S. Crude oil prices were driven higher this past spring due to the continuing Russian invasion of Ukraine. In addition, a lack of refinery capacity (versus before the onset of the COVID-19 pandemic) is still working its way through the economy as facilities struggle to hire more workers and increase production.
However, there may be some good news coming. Later in 2022, an increase in global oil supply could play a role in reducing gas prices in America. This relief is primarily due to additional capacity opening up in oil exploration and production and the traditional slackening of gas prices as the fall season begins.