A few ingredients that help the economy run like a well-oiled machine are (ahem) oil, natural gas, and coal. So energy prices going up can affect your budget in a big way.
Why are energy prices going up?
Gas prices had already been on the rise, thanks to high demand and short supply as the country's been recovering from the pandemic. But the news of Russia’s invasion of Ukraine sent prices even higher. Then, President Joe Biden announced on March 8 that the US would no longer import Russian oil in an attempt to further sanction the Russian economy.But it’s impacting the US as well. Months later, prices are still at record highs across the nation.
Energy prices more generally could also be pinched this summer as global warming puts more pressure on power supplies and demand.And where the demand simply can’t be met, there could be blackouts, especially in much of California and the Midwest.
Here’s what that means for your bottom line.
What you need to know about rising energy prices
Those higher energy prices could throw a wrench in the economic recovery. Because a lot of businesses rely on planes, trains, autos, and other machinery that require oil to get the job done. And some might pass those higher costs onto consumers. Think: more expensive plane tickets, furniture shipped cross-country, and even food harvested with gas-powered tractors. Hello, inflation. And tighter budgets.
Your investments may also hit some turbulence. When the cost of doing business goes up, bottom lines can suffer. Meaning stock prices for companies that rely on oil, natural gas, or other forms of energy (hi, airlines and cruise lines) could go down. But it’s not all bad. Energy stocks tend to have really good days when oil and gas prices jump.
What can you do about rising energy prices?
You can’t control the prices on energy commodities, but you can prep your finances for when they go up. Here are some ideas.
Budget for rising prices.
The price tags on everyday items (like chicken, diapers, fruits and vegetables, and furniture) have already been on the rise. A jump in energy prices hasn’t helped. That makes comparison shopping more important than ever. And if there aren’t any easy swaps for the products you need, look for other regular monthly expenses that you can downgrade or cut completely to make room in your budget.
Turn down for savings.
Lowering the heat when it’s cold and your AC use when it’s hot can help. Also try blocking up drafts around windows and doors.
Look for ways to save when you fill up.
Diversify your investments.
Aka don’t put your financial eggs in one basket. Spreading your money across many different investment types, sectors, etc. will prevent your portfolio from taking a big hit when one area of the market slips.
A big jump in energy prices could affect what you pay for a lot of necessities. And maybe (temporarily) shake up your investments. So power up your personal savings where you can by looking for easy ways to save on utilities, gas, and food bills. And weather a volatile stock market by building a well-diversified portfolio.
Updated June 2 to include recent changes to energy forecasts.
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