Oil prices can sock it to you at more than just the gas pump.
After reaching $70 a barrel in January, oil prices have hovered above $60 a barrel. That’s about 50 percent higher than they were last summer and double two years ago. Prices change daily, but hitting the $80 mark by the end of the year doesn’t sound too preposterous, Yoon Chou Chong, head of Asian equities at Natixis Asset Management, told CNBC.
You feel it when you fill ‘er up, but petroleum products also go into a wide range of goods such as fertilizer, tires, plastics, skin creams, detergents and many more. Here’s a look at 13 ways higher oil prices can put you and your budget over a barrel.
The national average price for regular gasoline lately has inched up to more than $2.65 a gallon, AAA reports. That’s pumped up around 13 percent from $2.34 a year ago. A typical 15-gallon fill-up at $2.65 a gallon will run you $39.75. That’s just almost a $5 difference from year-ago prices, but if you fill up twice a week, it’ll cost you $520 more for the year.
If gasoline reaches its record average of $4.11, seen when the economy was tanking in July 2008, filling up a 15-gallon tank will cost $61.65, about $6,400 a year for that twice-weekly stop at the pump.
Rising jet fuel prices could be the wind beneath airline ticket price hikes.
Jet fuel runs around 30 percent of an airline’s cost and, coincidentally, its price is running about 30 percent higher than a year ago.
Doug Parker, chief executive officer of American Airlines, was quoted in a recent Bloomberg report as saying that fares “are too low for oil prices this high.” Carriers will find a way to pass on the increase to consumers, he said, “but it takes time.” There’s generally a gap of at least three months between when jet fuel costs climb and fare increases show up.
Whether you’re a vegan or a steak lover, increased food costs are hard to swallow. And the cost of producing food and getting it from farm to table rises when oil prices go up. From farm machinery and water pumps to nitrogen-based fertilizer, agriculture is one of the most energy-intensive industries in the world, analysts say.
For some crops like oats, corn, wheat and barley, energy and fertilizer expenditures combined make up more than half of total operating expenses, says the U.S. Energy Information Administration. Between 2001 and 2007, high oil prices added 40 percent to the cost of growing corn, wheat and soybeans, agriculture analysts say.
4. Loan rates
Interest rates and oil prices tend to move together. Higher oil prices contribute to inflation, which the Federal Reserve tries to fend off with higher interest rates. So rates for car loans and mortgages often rise when oil prices do.
Rates for a typical 30-year fixed home loan are running about 4.3 percent, more than half a percentage point above last September, when they were 3.75 percent; auto loans, now around 3.4 percent, had an average rate of 2.5 percent in August 2017.
5. Metro homes
Location, location, location! Homes in areas with longer commutes tend to sell at lower prices when gasoline goes up, while homes with shorter commutes tend to sell at higher prices, Adele Morris, a senior fellow and policy director for climate and energy economics at Brookings, recently told Business Insider.
A 10 percent increase in gas prices can mean a 2 percent price bump for homes closer to a city center, says a 2014 study by Morris and Helen Neill of the University of Nevada, Las Vegas.
Rising gasoline prices drive sales of fuel-efficient cars, making deals harder to find.
Prices for compacts, compact SUV/crossovers and electric vehicles are among those rising the fastest, a Kelley Blue Book analysis shows. The estimated average transaction price for U.S. light-vehicle sales was $35,285 in March 2018, up $703, or 2 percent, from March 2017.
Tire prices are where the rubber meets the road, so to speak.
Oil makes up about a quarter of the cost of synthetic tires, the kind most consumers buy. Each tire takes about 7 gallons of oil to produce, according to tire makers: 5 gallons are feedstock, from which the substances that combine to form synthetic rubber are derived, and 2 gallons supply the energy necessary for the manufacturing process.
One possible pricing exception: Tire makers may hold the line if people drive less due to higher gasoline prices, and tire demand drops.
8. Oil stocks
Rising oil prices push profits up the quickest for companies, such as ConocoPhillips, that sell crude oil, analysts say. That boost can send their stock prices up.
Oil refiners, such as Andeavor and HollyFrontier, that focus on making gasoline, diesel fuel, heating oil, jet fuel and other products rely on what’s known as the “crack spread,” the difference between what they pay for crude oil and the selling price of refined petroleum. Refiners may get squeezed by higher oil prices, limiting their profit potential and thus their stock price potential.
“Integrated majors,” or “Big Oil” companies, like ExxonMobil and Chevron, explore, produce, refine and market refined products. Generally, higher oil prices benefit Big Oil’s bottom line, analysts say.
Shipping companies deliver higher prices when their fuel costs rise. UPS and FedEx, for example, adjust fuel surcharges for ground and air delivery services weekly, depending on diesel and jet fuel prices.
UPS, for example, raised its ground fuel surcharge to 6.5 percent in January. It was 6 percent in November 2017, and lowered to 6.25 percent in April 2018. If diesel prices nationally average $3.14 to $3.26 a gallon, UPS could boost its surcharge another half-point to 6.75 percent.
You might find the price of furniture growing uncomfortable.
When oil prices rise, the cost of transporting materials to furniture factories goes up, along with the costs of shipping furniture to a store or to your home.
The cost of synthetic fabrics used in furniture upholstery go up as well. Petroleum-based fibers include rayon, nylon, polyester and artificial furs.
11. Health care
Have you looked in your medicine cabinet lately? Aspirin, nasal decongestants, rubbing alcohol, deodorants, cough syrup, lotions, antihistamines, insect repellents, moisturizers and, of course, petroleum jelly are among the many products made in some form from ingredients derived from crude oil.
Petroleum-based plastics are found in stethoscopes, catheters, tubes, prosthetics, artificial corneas, hearing aids and pill capsules, to name a few products.
While petroleum products aren’t the biggest health care cost driver, they can make you feel sick. When crude oil prices rose just 1 percent in a month, says one U.S. study, health care costs rose 0.03 percent and remained higher for 20 months.
Want to build something? Oil will be involved, which means the cost of building materials can go through the roof when oil prices spike.
Roofing, PVC, insulation, lumber, steel, aluminum and cement usually see cost increases when oil prices rise.
Even if you just want to remodel a kitchen or bathroom, not only will transporting the material cost you more, but petroleum also is likely to be part of nearly every purchase. In the kitchen the coffeepot, cooking utensils, refrigerator shelves, dish sponges, trash bags and nonstick pans are derived from petroleum products, Lubbock Online reports.
What prices have you seen go up due to rising oil prices? Share with us in comments below or on our Facebook page.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.