Hurricane Ida is set to push up gasoline prices, which could weigh on US consumer spending and gross domestic product, Moody’s Analytics has said.
Ida made landfall on Sunday, causing widespread destruction and leaving more than 1 million people without power in Louisiana. President Joe Biden declared a “major disaster” in the state. The hurricane was downgraded to a tropical storm on Tuesday.
Moody’s Analytics analyst Ryan Sweet said in a note on Monday that Ida’s economic costs could quickly mount. “As with [2005’s] Hurricane Katrina, Ida could have a more significant impact on GDP via higher energy prices,” Sweet said.
Despite causing 96% of US oil production in the US Gulf of Mexico to shut down, according to the Department of Energy, energy markets had shown relatively little reaction to Hurricane Ida as of Tuesday. But Sweet said: “Higher prices at the pump are coming.”
“After Hurricane Katrina in 2005, gasoline prices jumped from $2.61 to $3.07 per gallon,” Sweet said. “The magnitude of the increase in gasoline prices will factor into the hit to consumer spending and GDP… Real consumer spending fell in August and September 2005 because of the rise in gasoline prices.”
Yet Sweet said the hit this time around may be smaller because consumers are sitting on more than $2.5 trillion in excess savings built up during coronavirus lockdowns.
Sweet stressed the economic costs of Ida cannot yet be known. He said the overall hit to US GDP was likely to be marginal, although higher gas prices may cause more damage.
If you’re planning to take a road trip this summer or spend more time outside than last year, you may want to check out the price of gas in your area. Gas prices have climbed over the past year and as Insider’s Heather Schlitz reported, the American Automobile Association said gas prices could reach a seven-year high, increasing to $3.25 by the end of August.
Gas prices vary depending on where you live in the US.
This map shows the price of regular gasoline per gallon as of July 5, 2021 using data from the US Energy Information Administration. The map is split into Petroleum Administration for Defense Districts, or PADD regions, where each state belongs to a region. We highlighted the prices for the sub-PADDs that make up the East Coast, as the EIA data shows that prices differ within the East Coast region.
Regular gas prices in the West Coast PADD were higher than other regions at $3.84 per gallon. Regular gas prices in the Lower Atlantic PADD, which includes states like Florida and Georgia, were $2.92 per gallon.
As millions of Americans hit the road for the Fourth of July weekend, many will be forced to grapple with elevated fuel prices and a gasoline shortage.
The national average fuel price during the holiday weekend will be about $3.11 per gallon – 43% higher than this time last year and about 2% higher than Memorial Day weekend – according to a GasBuddy analysis.
There have also been several fuel outages reported at gas stations across the country. Gas stations in Northern California, Colorado, and Iowa have run out of gas, according to Tom Kloza, the global head of energy analysis for the Oil Price Information Service, told CNN. GasBuddy analyst Patrick DeHaan told the publication that Indianapolis and Columbus, Ohio have also reported gas outages and the number of stations in the US facing shortages is continuing to grow.
Nearly 44 million Americans are planning to take a road trip this holiday weekend, according to a AAA report. But, Kloza said the shortages have not been caused by a spike in demand or OPEC production rates. Instead, a shortage of oil tank truck drivers has made it difficult for gas stations to get fuel deliveries.
“It used to be an afterthought for station owners to schedule truck deliveries,” Kloza told CNN. “Now it’s job No. 1.”
Transportation is one of many industries facing a labor shortage in the wake of the pandemic. But, unlike other transportation roles, oil tank drivers are required to have special qualifications, making it even more difficult to find drivers with the necessary expertise. An analysis by the National Tank Truck Carriers in April found that 20% to 25% of oil tank trucks are not in use due to the shortage of drivers.
Everywhere you look, there seems to be a new shortage popping up in America’s currently very strange economy. From chicken to gas, it’s getting harder to come by items as supply-chain issues, outsized demand, and the climate crisis all converge to choke accessibility.
But as Americans learn to live in a new normal yet again – this time with vaccines, fewer masks, and slightly eased pandemic-era restrictions – demand for things like travel and hotels is on the rise. With a long weekend coming up, Americans are ready to get back into the world. But the economy may not be ready for them: Here are the shortages that could plague Memorial Day weekend.
Vacation-home rentals in the US are at an all-time high this year.
More people are looking to travel as the vaccination rate increases. In the US, 65% of people plan to travel more this year than before the pandemic started and 82% of families have already made vacation plans, according to online rental hub Vrbo.
If you haven’t rented out a vacation home yet, it might be too late to find one this year: 85% of vacation rentals in Cape Cod, the Outer Banks, and along the Jersey shore, are booked through August, Vrbo said.
It’s not just vacation and rental homes seeing a surge: Hotels and motels saw their costs increase by 8.8% in April, according to the Bureau of Labor Statistics.
CNBC reports that nightly prices are on the rise, and are likely only to increase as summer travel goes into full swing. In fact, prices in coveted areas, like beaches, have soared above pre-pandemic levels.
While some industries say they’re struggling to find workers and staff up, the leisure and hospitality sector actually saw notable gains in April’s jobs report. While the report came in far below expectations — with just 266,000 jobs added, instead of the expected 1 million — leisure and hospitality emerged the strongest.
Prior to the cyberattack last weekend, prices were not expected to see another significant spike until after Memorial Day, when travel is expected to push demand even higher at the end of the month.
But, even before the pipeline was shut down, gas prices were skyrocketing as demand outstrips dwindling fuel supplies. In April, fuel prices leaped 9% in their largest one-month increase in nine years as shipping container shortages, port delays, and OPEC production cuts made the commodity increasingly valuable.
A new or used car
If you wanted to buy a car for that summer road trip you’ve been planning since March 2020, you may find yourself up against some fierce competition — and ever-increasing prices.
New cars are in short supply due to an ongoing shortage of the computer chips that power everything from the Bluetooth in cars to iPads, and their scarcity has been felt all over the economy. Some car manufacturers had to halt production at the start of the year, leading to more elusive models and higher prices.
That’s trickled down into the used-car market. In April, used car prices jumped by 10%. Insider’s Ben Winck reported that that was the largest one-month increase since 1953, when data first started to get collected. In fact, that price jump accounted for around a third of April’s big 0.8% jump in inflation from the previous month.
Experts attribute the shortage to demand for vehicles, especially as new cars are harder to come by, and rental car services attempting to rebuild fleets; many sold off some of their cars at the onset of the pandemic.
In hot tourist destinations, prices are surging; Jonathan Weinberg, the founder and CEO of AutoSlash, told Chang that some rental cars in Hawaii are going for over $500 a day — a massive increase from the usual $50. And rental car companies are expecting strong demand over the summer for their reduced fleets, all while coming up against the computer chip shortage.
But vacation goers might still find it expensive and difficult to get around if they’re counting on rideshare drivers. Uber and Lyft have been trying to lure drivers back to work with new incentives, but there’s still a persistent driver shortage. That’s due to a variety of factors, as drivers worry about safety and find stability in enhanced stimulus benefits.
If you’re planning on jetsetting over Memorial Day weekend, you may find the shockingly low flight prices of the pandemic have vanished.
That’s not to say there aren’t deals, as airlines unleashed a week of wild international flight deals in April; the risk with those, as Insider’s Tom Pallini reported, is that it’s unclear if those countries will be open to American visitors.
But, as the Washington Post reports, it could be a different story for domestic flights, especially over the summer. Rising demand and fares could be concentrated over the summer, as Americans race to take advantage of the weather and newly loosened pandemic restrictions.
Adit Damodaran, an economist at travel booking app Hopper, told Insider’s Jamie Ditaranto that demand is concentrated around late May and early June — and that prices may rise by 15%.
Bacon and hot dogs
Memorial Day barbeques will be impacted by the supply snags.
Bacon and hot dogs may be difficult to find in grocery stores, due to a global pig shortage. The hog industry has faced several setbacks this past year. High instances of swine decimated hog populations this past winter and COVID-19 outbreaks in at least 167 meat-processing plants forcing almost 40 plants to close as of June 2020.
It will be more expensive to celebrate the holiday with fireworks this year.
Superior Fireworks announced they were increasing their prices about 15% this year — the highest the company has ever had to hike prices in its 20-year history.
The company is one of many fireworks producers that have been forced to raise prices in order to compensate for higher shipping and production costs.
Vacationers looking to relax in the pool during the holiday weekend may face difficulty finding clean pools.
Last month CNBC reported the US is facing the worst chlorine shortage in history. Prices for the chemical used to clean pools has nearly doubled this past year and is only expected to continue to rise with warm weather.
Pool owners can avoid the shortage by using saltwater pools instead, according to Insider’s Annabelle Williams.
Imported goods like wine and cheese
Vacationers will pay top dollar for imported food.
Good from overseas, including seafood, cheese, and wine are facing months of shipping delays. Some grocery stores, including Costco have already reported shortage of imported food, while other companies have already begun to hike prices in response.
The Colonial Pipeline was back in action Wednesday night after a cyberattack led to gas shortages and outages across the East Coast, but experts warn it could take days to weeks for gas prices and availability to return to normal.
The Colonial Pipeline is the largest pipeline of refined oil products in the US, transporting over 45% of all fuel used on the East Coast (when not affected by a cyberattack) to more than 50 million people.
Following the hack and pipeline shutdown, several states declared states of emergency because of gas shortages, including North Carolina, Georgia, and Virginia. As shortages and outages swept the coast, gas prices skyrocketed.
AAA’s website noted that national gas prices hit an average of $3.03 on Thursday, the highest level since 2014.
US Energy Secretary Jennifer Granholm announced on Thursday morning that the attempt to restart the pipeline on Wednesday night was a success.
Previous reports suggested that Colonial Pipeline would not pay the $5 million in ransom requested by the hacking group behind the attack, DarkSide, but a new report from Bloomberg indicates that the company paid the ransom in cryptocurrency “within hours” of the attack.
The hacking group behind the cyberattack, DarkSide, received $5 million in ransom from Colonial Pipeline, Bloomberg reported.
Since the attack, Colonial Pipeline’s website has added a CAPTCHA security check before entering the site, seemingly in an effort to prevent a future hack. The company has been searching for a cybersecurity manager for at least 30 days, according to a posting on the company’s open job listings.
Colonial Pipeline said in a press release on Wednesday it had “initiated the restart of pipeline operations” at approximately 5 p.m. ET.
“Following this restart, it will take several days for the product delivery supply chain to return to normal. Some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions during the start-up period,” the company said.
“Colonial will move as much gasoline, diesel, and jet fuel as is safely possible and will continue to do so until markets return to normal,” it said, adding that it’s conducting various safety assessments as it resumes operations.
The announcement follows widespread gas shortages across the eastern US that resulted from the pipeline being taken offline by a crippling ransomware attack.
The Biden administration has been working with Colonial to get operations restarted. The Russia-based hacking group DarkSide acknowledged it launched the attack, saying it didn’t intend to cause “problems for society,” and would approach targets differently in the future.
More than 1,000 gas stations in eastern US states ran out of gasoline after a cyberattack knocked out a crucial US pipeline which supplies much of the region’s gasoline.
Price rises and panic-buying followed the news, which led to widespread shortages as operators struggled to move fuel supplies without the out-of-action Colonial Pipeline.
According to the app GasBuddy, as of late Wednesday the worst-hit states were North Carolina, where 16% of stations were out of gas, Georgia, where 10.4% were empty, and Virginia, where 10.2% had run out.
The figures were an increase on those released only 5 hours previously, with the percentage of gas stations that were empty in North Carolina increasing by 2% in North Carolina and about 1% in Georgia and Virginia respectively.
Luxury items became even more expensive last month as the price of goods in the US saw its highest monthly increase in nearly 9 years, according to the US Bureau and Labor Statistics’ Consumer Price Index.
Jewelry and watches were among several items that pushed the overall surge in prices. The cost of jewelry in the US rose 7.4% from the previous year and nearly 6% between February and March, according to the index.
Similarly, the price of watches also rose 4.3% from 2020 and 2.4% in the past month alone.
While the price increase might not seem particularly high on a surface level, they could put a further strain on the wallets of people buying big-ticket items.
If applied to the average price of a Rolex in 2020 – which falls around $12,000, according to Wrist Advisor – rising prices mean buyers can add about $500 to the price tag.
And that’s just for the average buyer. Customers looking to purchase even more pricey watches, like Rolex’s $75,000 model, would have to tack on an additional $3,000 to that price tag.
Similarly, for couples looking to buy a diamond engagement ring – an item with an average price around $5,000, according to Jewelry Wise – buyers can expect to pay an additional $370 this year, or even see a price increase of $285 from the previous month.
Prices in the US are only expected to continue to rise in the coming months, as increased vaccination rates allow the economy to reopen and demand to surge.
The cost of goods has also been impacted by several supply disruptions, including a shipping container shortage, port delays in California, and the impact of the Texas freeze on production in the state. Many companies are also still struggling to meet demand after cutting back on production due to COVID-19 shutdowns last year.