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Rising gas prices and lower chip availability will be challenges this winter

Written By | Nov 17, 2021
The Car Coach, Gas Prices, Chip Shortages

The Car Coach

Gas experts say crazy high prices at the pump are going to continue into the winter. Normally, a dip in gas prices is expected this time of the year, but with high demand and short supply, prices will stay where they are this holiday season. In fact, they may increase as travelers hit the road for the holidays. Add this to the lack of car production and the chip shortage and we are looking at some massive increases in prices on everything we use every day.

The details behind the gasoline increases

The cost of crude oil is the largest factor in the retail price of gasoline. The cost of crude oil as a share of the retail gasoline price varies over time and across regions of the country. U.S crude oil prices are determined by global fundamentals, including supply and demand, inventories, seasonality, financial market, and expectations.

Taxes are added to the price of gasoline. Federal, state and local government taxes also contribute to the retail price of gasoline. The federal excise tax is 18.30¢ per gallon. As of January 1, 2019, state taxes and fees on gasoline averaged 28.31¢ per gallon. That is a significant impact on gasoline prices.

Gasoline prices are also affected by the cost of other ingredients that may be blended into the gasoline, such as ethanol. The Keystone pipeline shutdown also contributes to increased fuel prices. The price at the pump also reflects local market conditions and demand.

The details behind the chip shortage.

The chip shortage has obviously weighed on the auto industry. We keep hearing analysts push back the projection for when the concerns may ease,
This going to continue to be a problem well into next year, from the companies I have spoken to personally we may not have this resolved until the end of next year.

For every car or truck that does not roll off an assembly line in Detroit, Stuttgart, or Shanghai, jobs are in jeopardy. They may be miners digging ore for steel in Finland, workers molding tires in Thailand, or Volkswagen employees in Slovakia installing instrument panels in SUVs. Their livelihoods are at the mercy of supply shortages and shipping chokeholds that are forcing factories to curtail production.

The auto industry accounts for about 3% of global economic output, and in car-making countries like the USA, Germany, Mexico, Japan, South Korea, or states like Michigan, where the percentage is much higher. A slowdown in auto-making can leave scars that take years to recover from.

The shock waves from the semiconductor crisis, which is forcing virtually all carmakers to eliminate shifts or temporarily shut down assembly lines, could be strong enough to push some countries into recession. This translates to higher prices for you as a buyer and the demand hasn’t lessened.

Here’s the Bottom line:

With supply chain disruptions striking countless products that Americans use regularly. The long-term energy crisis including green energy will be constrained into the middle of winter. Most Americans are completely dependent in one way or another upon natural gas, propane, heating oil, gasoline and other energy products to survive day-to-day.

We hear from multiple outlets, to be ready for higher prices that impact every person globally.

Wall Street Journal: “Natural-Gas Shortage Sets Off Scramble Ahead of Winter”
Energy Wire: “4 ways the energy crisis hits U.S. electricity, gas, EVs”
Forbes: “Gas Prices Climb, No Relief Before The Holidays”
CNN Business: “Gas prices skyrocket as the global energy crisis worsens”
Bloomberg: “Europe’s Energy Crisis Is Coming for the Rest of the World, Too”
Reuters: “Global gas shortage helps lift prices in the United States”

A solid strategy is needed to deal with the energy crisis that is here.

Unfortunately, there doesn’t seem to be an answer from our current government. We could be potentially facing simultaneous shortages of oil, natural gas, propane and coal, and other products we consume every day.

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Lauren Fix

Lauren Fix, The Car Coach®, is a nationally recognized automotive expert, analyst, author, and television host. A trusted car expert, Lauren provides an insider’s perspective on a wide range of automotive topics and aspects, energy, industry, consumer news and safety issues.