BUSINESS + ECONOMY
Expert says people will pay even more for groceries due to high gas prices
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SALT LAKE CITY — Gas prices in Utah have spiked to near record levels, rising over 30 cents per gallon in the last two days. Retail analysts are predicting our groceries will go up because of this, but they’re not certain when that will happen, or how much extra we will have to pay.
According to AAA, the average gallon of gas costs almost $4.20 in Utah on Wednesday, March 9. Just one day prior, it only cost $4.01. The previous record was set in 2008, but Utah Food Industry Association President Dave Davis says we didn’t feel the brunt of covering rising shipping costs back then.
Davis said, “We didn’t have all of the supply chain issues and other issues going on at that same time.”
Groceries and high gas prices
There’s no formula to predict exactly when food prices will rise or by how much. However, Davis says the longer a product has to travel to get to our stores, the more likely it is to cost more to the average consumer. For example, the price of grapes coming from California could go up, moderately, while bananas coming from outside of the U.S. could cost quite a bit more.
In the past, shipping companies and food retailers have simply “eaten” the cost of high gas prices if they believed the spike was a short-term problem. However, Davis says grocery stores aren’t running at a high enough profit margin for that to happen, now.
“Food retailers are operating, right now, on somewhere between 1.5 and two percent net margins,” Davis said. “There just isn’t an opportunity to be able to just absorb those costs.”
Plus, Davis doesn’t believe rising gas prices are a short-term thing. He says the Biden administration will have to allow domestic oil companies to produce more crude, immediately, if gas prices were to come down. Davis says it appears the president is hesitant to do that. He says the administration’s goals to move away from fossil fuels are a good thing in the long run, but they won’t help people who are struggling, now, with groceries and high gas prices.
“We have to deal with the reality of filling the pantry right now, feeding kids and taking care people’s day-to-day needs,” he said.
- Oil industry insiders say Biden will have to make big changes to bring Utah gas prices down
- Gas prices will get worse, Utah congressman warns
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