Surge in Oil Prices Will Mean More Expensive Gasoline — and Trouble for Retailers

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Crude oil futures have taken off and stand at $54 a barrel, compared to less than $47 at the end of August. That 15% increase means gasoline prices will rise. Many analysts believe oil is headed even higher, which means year-end holiday travel will get much more expensive. That in turn may change the financial fortunes of companies that rely on foot traffic for their success, especially retailers.

The average price for a gallon or regular nationwide is $2.47, according to AAA Fuel Gauge. That is up from $2.22 a year ago.

The AAA reports that gas prices have dropped from an increase during the hurricane season, but the improvement is only relative. Jeanette Casselano, AAA director of public relations, said:

 Despite recent declines, the residual impact of last month’s hurricanes linger. Drivers continue to pay in excess of 20 cents more for a gallon of gasoline than they did in 2016, which may prove challenging for those looking to put away some extra cash for the holidays.

The effects will be mixed by region. While the average price of a gallon of regular in California is over $3, it is $2.20 in Mississippi. To complicate matters further, when experts try to measure how gas prices will change consumer spending habits, the cost of living and incomes are very high in California compared to the rest of the nation. By similar comparison, the living costs and income are near the bottom of the country based on numbers state to state.

The relationship between consumer spending and gas prices is as old as the gasoline-powered car. The holiday quarter at the end of each year is when many retailers make most of their money and post a large portion of their sales. And many retailers are already deeply troubled by sales that have fallen, often because of their war with e-commerce. The success of Amazon’s recently released earnings and those of J.C. Penney show the sharp contrast. And, of course, people can shop Amazon without a car or gas.

Gas prices will rise this holiday season, and with that, some businesses will be challenged.