You may have noticed that you’re paying more at the pump these days. That’s because U.S. oil prices have risen more than 16 percent since the beginning of the year, climbing above $70 a barrel in May for the first time since 2014.
A number of issues are fueling (sorry) the increase, including petroleum-rich countries like Saudi Arabia limiting production and the U.S. withdrawing from the 2015 Iran nuclear deal and renewing sanctions against countries that import Iranian oil.
First, the good news: You’ll probably see a bump in your stock market investments.
Major oil and gas companies like ExxonMobil and Chevron have seen their share prices shoot up this month. That can benefit anyone invested in these companies or this sector—and that probably includes you. If you invest in index exchange-traded funds, for example, a portion of your portfolio is likely already in energy—so no need to try chasing these returns.
Pricier oil means pricier gas, too. The average national price for regular gas is $2.84 a gallon—about 20 cents higher than last month and 50 cents higher than a year ago (though still well below the July 2008 high of $4.11). The Oil Price Information Service predicts rising prices could mean you’ll be spending an average of $200 more this summer filling your tank.
But wait, there’s more... You’ll also have to budget more for airfare and maybe even shipping. Businesses, too, have to factor in rising oil and gas prices, and any that rely on these energy sources for production or transportation—so, basically all of them—are likely to pass those costs on to their customers.
Rising oil prices often have a ripple effect on other prices, increasing inflation, which, in theory, could encourage the Federal Reserve (our central bank) to raise interest rates at a faster pace. That means you could soon pay more in interest on any variable debt you have, like on a credit card.
Nobody knows how oil price movements will really affect stock markets, consumers or the economy over the long term. But, yeah, you can count on paying a little more for a lot of common items.
So it’s a good idea to adjust your budget now and look at how to mitigate those rising costs—or to start saving a little more to cover them. You can find the cheapest gas in your area by using comparison services like Gasbuddy and Gas Guru or ones included within Waze and Google Maps, which may ease the pain at the pump a little. You could also buy plane tickets now before airfares (likely) rise for trips you’re planning later this year. This may also be a good excuse to look at more wallet- and environmentally-friendly transportation options like biking, bussing or carpooling, too.