The cost of natural gas, crude oil, and diesel have not only skyrocketed in recent months, they have been rising for over a year. Miami University experts discuss the reasons for the escalating inflation, predictions about the future, and the consequences for some of our most vulnerable citizens, as well as the social shifts and potentially positive cultural changes that could occur as a result.

Jonathan Wolff, associate professor of Economics

Wolff is an expert on inflation, unemployment, and monetary and fiscal policy. Wolff speaks about the intersection of several factors leading to inflation.

Even before Russia’s invasion of Ukraine, U.S. inventories of natural gas were low after having been tapped to cover shortfalls caused by extreme weather events. Production was [also] reduced significantly during the pandemic, and is still significantly below the pre-pandemic high.” 

“The same slowdown in production is also true for crude. When economic activity slows, the fuels needed to power that economic activity also decline. However, few could have predicted the speed with which the U.S. economy recovered from the initial shut down. U.S. real GDP per capita is now 2.3% higher than it was in the quarter just before pandemic. And a growing economy means a growing demand for energy.” 

“Second, energy companies are weary of making long-term investments as society pushes for clean energy alternatives. Investment in new equipment and facilities can take 8-10 years to become profitable. Because of the long run nature of these investments, such policy changes can have a significant impact on the growth of oil supply.” 

“Third, the EU is also looking to reduce their dependence on Russian oil and natural gas and has turned to the U.S. for help. Almost overnight, the U.S. became the world’s largest exporter of liquefied natural gas needed to heat and power the 2023 European winter.”

“Recent estimates suggest that natural gas could reach $8.00 in the coming months, and the national average price of gasoline could exceed $6 a gallon this summer. To see lower prices, we need to either see a decrease in demand or an increase in supply. And an increase in supply seems unlikely, at least in the short run. For the coming months, this will be the new normal. Few, if any, concrete steps seem to be in motion that would increase supply in the order we need.”

“Continued increases will almost certainly drive us into a recession (if we aren’t there already). In the short run, it is very difficult to change your demand for energy. In the longer run, people might choose to relocate closer to work and school. But the breaking point will be different for different families. The greater the percentage of your annual income spent on basic essentials, the more inflation hurts.”

Helaine Alessio, chair and professor of Kinesiology, Nutrition, and Health

Alessio is an expert in a variety of health and exercise-related fields including active transportation, which encourages walking and biking to address multiple societal challenges such as environmental sustainability and an over reliance on fossil fuels. 

“Rising gas prices can motivate people to find other ways to commute including carpooling, planning shorter routes, or limiting trips. There are also other options that do not rely on gas fueled vehicles -- which represent 99% of vehicles on the road -- including public transportation, walking, or riding a bike.”

“The American Automobile Association found that 75% of drivers indicated they would change their habits or lifestyle if gas rose above $5 per gallon. While electric vehicles sales are increasing, sales of electric bicycles (ebikes) have skyrocketed. The direct correlation may be a coincidence. But it may reflect a desire to save money through transport that is quicker than a regular bike, and with no gas bill or carbon emissions.”

“Most people can ride a regular bike for 2-5 miles, and nearly all people can ride an ebike up hills and over long distances for 1-25+ miles. With current gas prices around $5 per gallon, for every 25 miles traveled by car, on average, a person who walks or rides can save $5 per gallon of gas. At the end of a week commuting in a gas-fueled car (e.g. ~$40 of gas to go ~200 miles), those savings can buy a lot of other things.”

“One silver lining reflects back on Plato’s statement: ‘Our need will be the real creator.’ If high gas prices prevent people from purchasing food, paying housing costs, or other necessities, they will find a way around the problem, and active transportation is a potential alternative solution.” 

“If people sense that safe trails to walk or ride are missing in their neighborhoods, they can petition their local government officials to explore ways to provide residents what they need: Safe walking and biking paths that connect with local establishments, points of interest for leisure, and other places in and around the city or town where they live.”

John Bowblis, professor of Economics and Research Fellow at Miam’s Scripps Gerontology Center

Bowblis is an expert on the economic analysis of policies, systems, and organizational structures that can impact the elderly and other vulnerable populations.

“It’s now harder for older adults and people with disabilities to get special needs transportation. Whether it’s people traveling between home and a doctor's office, or from an assisted living center to a medical facility, many of those services are reimbursed by government contracts that are paid fixed amounts – often through Medicare or Medicaid programs. So reimbursement stays the same. But if gas prices go up, it squeezes those transportation companies.”

“So many seniors are not getting the medical attention they need. That means less disease detection or preventative screenings. It could also mean that people who are older or disabled are unable to manage current conditions properly, which puts their health at even greater risk, and it's hitting rural areas the hardest.”

“People should know that there are other resources available through organizations like the Area Agency on Aging. Start looking into these resources ahead of time, see what’s available in your area, and begin scheduling things as far in advance as possible.”