How Rising Energy Prices Can Affect Your Wallet

Published on: Jan 14, 2022fb-roundtwitter-roundemail-round
high energy prices n2wDesign: theSkimm | Photo: iStock

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. And bad news: regular gas prices are up more than 58% year-over-year. 

What’s driving the surge? High demand and short supply. OPEC (aka a group of countries that aims to regulate the world's oil supply) kept oil production tight throughout the pandemic. It recently decided to boost output, but analysts say not enough. Especially as consumers around the world are ready to spend, driving factories and service providers to ramp up production.

Here’s what that means for your bottom line.

The deets that matter for your wallet: 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.

Your move: 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, rental cars, plastics, palm oil, tampons) 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. Keeping warm could cost more this winter. The US Energy Information Administration estimates heating bills will be 6% to more than 40% higher than last year, depending on your energy source. Lowering the heat and bundling up instead can help. Also try blocking up drafts around windows and doors.

  • Look for ways to save when you fill up. Try a free app like GasBuddy to find the cheapest stations near you. And for added savings, fill up using a rewards card that earns points or cash back on gas purchases. 

  • 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.

theSkimm

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 Jan. 13 to include recent gas price changes.

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Skimm'd by: Casey Bond, Sagine Corrielus, Liz Knueven, Ivana Pino, Stacy Rapacon, and Elyse Steinhaus