Higher Gas Prices Predict a Recession
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
While higher gas prices may be welcome news to the oil industry, the rest of us should be concerned. It is a glaring recession warning. Over the last 40 years, higher gas prices have been linked to economic stagnation and recessions.
The Ford F-150 is the most popular car in America, per Edmunds. It gets on average about 21 miles to the gallon. The U.S. Department of Transportation claims Americans drive 13,500 miles a year. According to AAA, the average price for regular gas was $2.76 a year ago. Today the average is $4.17. The average U.S. consumer spent $1,774 on gasoline a year ago. At current prices, the average consumer is spending nearly $1,000 more.
The spike in oil and gas prices is primarily due to two factors. Mostly it is Russia and its invasion of Ukraine. Behind the scenes is the global push toward greener energy sources.
I explore these considerations and the relationship of high gas prices to economic activity to appreciate this recessionary omen.
I use the terms oil and gas interchangeably throughout this article. Please understand gas is a byproduct of oil, and therefore its price is a function of oil prices and other factors.