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What Rising Costs of Gas Means For Supply Chains

By Avetta Marketing
April 06, 2022
3 minutes
What Rising Costs of Gas Means For Supply Chains

We’ve been here before. Hikes in gas prices and gas shortages can stem from multiple reasons but unfortunately, they aren’t new. In July of 2008, U.S. gas stations set a record for prices while 2010 also showed a similar hike in gas costs.  

Earlier this year, U.S. gas prices set another record, exceeding July 2008’s average highs and coming in around $4.17 for the national average. In 2008, gas price increases were a result of strong demand confronting stagnating world production.  

Russia is the second largest oil producer in the world—behind the U.S. The Russia-Ukraine conflict has forced the U.S. to implement crippling sanctions against Russia’s energy sources, leading to the massive spike in the price of all fuels like gasoline, diesel, jet fuel and more.  

The U.S.’ decision to cut Russian crude oil imports isn’t the sole reason for the jump in gas prices. Technically the U.S. produces enough oil, but it’s cheaper for refinement purposes to get some oil abroad. Russia supplied just eight percent of U.S. oil supply, so cutting off the country’s export shouldn’t lead to a 65% increase in gas prices. The increase is a combination of things—or ripple effects on what’s happening globally. They’re due to war/conflict over in Eastern Europe on top of a pandemic that’s severely disrupted global supply chains, increasing demand and an evolving industry

The cost of gas is just the start and may be the least of most consumers’ worries. In fact, buying gas for personal cars is not the biggest part of most American budgets.  

How will supply chains be impacted?  

Record high gas prices mean an increase in operational costs and product costs, so both the business and consumers are affected. From trucks to shipping containers to airplanes, the cost of oil will also drive up the cost of transporting goods.  

Adding to the challenge for consumers is that during the pandemic, many people have been accustomed to buying more items through local delivery, and delivery fees may be rising as well due to the gas hike. 

This is all a domino effect. Agriculture in general relies on a lot of fuel and as energy prices go up, food prices are going to go up. Anything that is manufactured and has to get shipped is going to be more expensive. 

What’s next? 

Experts agree the record high gas prices won’t last forever, and consumers shouldn’t expect numbers like $6 or $7 a gallon. Although prices are already started to decline, U.S. consumers can still feel the impact of a disrupted global supply chain for months. But in addition to a pandemic that’s strained global supply chains, created labor shortages, caused record inflation, and closed shipping ports, the increase in gas prices is just another blow to the American wallet.  

To learn more about supply chain management and emergency preparedness visit our website, call 844-633-3801, or email [email protected]

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