Gas prices edge up slightly due to oil market volatility: AAA
After falling for several weeks, gas prices rose slightly again, AAA reported on Monday.
The national average gasoline price rose to $3.80 a gallon, four cents higher than the previous week. The sudden price spike was due to volatility in the oil market, AAA said.
Oil prices fluctuated on fears that Russian oil production cuts could lead to tighter global supply.
However, news that China has entered another COVID-19 lockdown could signal a potential economic slowdown for “the world’s largest oil-consuming country” and could prevent further price increases at the pump, according to AAA.
“The oil market, like the stock market, hates negative headlines, no matter how speculative,” said AAA spokesman Andrew Gross. “And that’s why we’re seeing the price of oil rally to over $90 a barrel. More expensive oil generally leads to more expensive gasoline, but recent COVID-related news from China may stem that rise.”
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JOB GROWTH SLIDERS IN OCTOBER, BUT EXCEEDS EXPECTATIONS, LATEST BLS DATA SHOWS
Biden announces initiatives to reduce gas prices
In October, President Biden announced the release of an additional 15 million barrels of oil from the emergency reserve, saying it would lower gas prices and bolster domestic oil production. The decision is part of the 180 million barrel withdrawal announced by the administration in the spring.
Biden also targeted oil and gas companies over the $100 billion in revenue they made in the past six months. At a press conference last week, Biden said oil companies must invest their record profits to cut costs for Americans and increase production, or face additional taxes on those profits.
Biden said if those companies passed on their past six-month profits to consumers, gasoline prices could drop another 50 cents.
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Consumers also face higher costs to finance car purchases, analysis finds
It’s not just gas prices that are going up. The Federal Reserve last week announced its fourth rate hike of 75 basis points this year. Economists have said interest rates are likely to rise again this year as inflation remains well above the Fed’s 2% target.
Interest rates paid on auto loans jumped to 5.7% in the third quarter of 2022, the highest rate since the third quarter of 2019, according to Edmunds. Rising borrowing costs and rising car prices have put some popular car models out of reach for many Americans, according to a recent analysis by automotive search engine iSeeCars.
New car prices jumped about 29% in August compared to August 2019 and used car prices rose 52% over the same period.
However, revenues did not keep pace and rose only 13% in August compared to August 2019. As a result, new car affordability fell 13.3% from August 2019 to August 2022 and the affordability of used cars has decreased by 26.7%.
“Due to supply chain shortages and increased demand, price increases for new and used cars have outpaced revenue growth,” said Karl Brauer, executive analyst at iSeeCars.
“People still need to replace their vehicles, so the resulting decline in affordability means buyers are accepting longer loan terms and paying higher interest rates, putting less money down for a down payment, or even give up the type of car they originally wanted for a lower-cost model to make ends meet,” Brauer continued.
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