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Skyrocketing Gas Prices Pressure Businesses, Consumers – Week in Review, March 4-10

The impact of higher gas prices on the economy and consumer trends, ongoing concerns about labor and inflation, and calls for stricter regulation in cryptocurrency and among fintechs were among the top items in business news in the past week.

Surge in gas prices

The conflict in Ukraine has driven a rapid increase in gas prices. Among the factors playing into this trend is a United States ban on Russian oil imports and disruptions to energy markets, with petroleum producers seeking to ramp up output as competition for available supplies increases. Oil executive and government officials have further warned that short-term options to address the issue are limited, with greater volatility and higher energy costs likely to persist, and some analysts have raised concerns that higher gas prices raise the likelihood of a near-term recession.

Higher gas prices are quickly having an impact on consumer behavior and business costs. As with previous spikes in fuel costs, consumers are planning to reduce spending on areas such as dining out or clothing purchases to offset the higher costs of filling up their tanks. Pricier gas is driving up wholesale costs and having a direct impact on some businesses, such as landscapers, delivery services, and others that use gasoline in their operations. This is prompting companies to consider passing on the higher costs to the customer.

Ebbing COVID concerns, lingering labor and inflation woes

Following the rapid decline in COVID-19 cases after the spike in infections caused by the Omicron variant, fears about the virus have largely waned. A Gallup poll, issued shortly before the Centers for Disease Control relaxed its recommendations on indoor masking, found greater optimism about the COVID-19 situation and reduced fears about contracting the virus.

While COVID-19 is proving to be less disruptive, business owners are still reporting significant concerns about available labor. The Labor Department’s latest jobs report shows 678,000 new jobs in February, including a rebound in “prime age” workers. However, job openings remain elevated, with 11.3 million positions available in January and quits exceeding 4 million for the eighth consecutive month. The National Federation of Independent Business finds that nearly half of small business owners have job openings they cannot fill, with labor costs and quality remaining as the top issue facing these companies.

Another NFIB poll found that more than one in four small business owners cited inflation as the biggest problem facing their company, the highest level since 1981. Federal Reserve Chairman Jerome Powell has warned that the Russian invasion of Ukraine has upset hopes that inflationary pressures would begin to ease in the near future, but that the central bank remains committed to its plan to start raising rates to counter inflation.

Fintech and crypto regulations

Richard Hunt, the head of the Consumer Bankers Association, has called for fintech companies offering banking services and products to voluntarily accept consumer protection laws and federal oversight from the Consumer Financial Protection Bureau. The organization has previously called for regulation of fintech lenders to ensure that they face the same regulations as traditional banks.

President Joe Biden has signed an executive order directing the Treasury Department and other federal agencies to review the impact of cryptocurrency and calling on the Federal Reserve to explore whether it should establish its own digital currency. The order is regarded as a first step toward the potential regulation of digital currencies.

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