Surge in US Gasoline Prices: A Double-Edged Sword for Investors and Business Owners

America's gasoline prices are witnessing a notable uptick, their most significant one-day move since June 6, 2022. The cost of a gallon of regular gasoline rose by 4 cents overnight, concealing considerable discrepancies across states, with an 8 to 10 cent surge reported in the Midwest and Florida.

This price surge stems from a ripple effect created by Exxon Mobil Corp.'s unexpected closure of a unit at one of the US's largest refineries, leading to a spike in gas futures last week. It’s disconcerting news for drivers who reveled in the reprieve of last year's record-high gas prices, and policymakers grappling with above-target inflation.

The increase in gasoline prices could prove troubling for President Joe Biden, whose approval ratings have shown a tendency to align with the trajectory of prices at the pump. Last year, Biden mitigated high gas prices by drawing from the Strategic Petroleum Reserve. 

Simultaneously, the Federal Reserve is expected to halt its inflation-curbing interest rate hikes after this week's meeting. However, this move in gasoline prices might prompt the Fed to remain cautious about inflation expectations.

The consequences of these shifts will be multi-dimensional for investors. For those invested in energy sector stocks, this surge could yield positive returns in the short term. However, for investors whose portfolios lean heavily toward sectors like transportation, logistics, or any industry with high fuel usage, the implications could be adverse as operational costs could soar, translating to decreased profits.

As for business owners, especially those operating small to medium-sized enterprises, the higher fuel prices could imply increased costs across various fronts, from transportation and logistics to utilities. Companies with heavy reliance on gasoline for their operations may face significant cost pressures that could squeeze margins and hamper growth.

Conversely, businesses in the energy sector, particularly oil and gas companies, might observe increased profitability due to higher product prices. Similarly, green energy companies might also witness a boost as higher gas prices could catalyze a shift towards more sustainable and cost-effective energy alternatives.

In some states, gas prices might escalate by as much as 10 to 25 cents this week. As per Patrick De Haan, head of petroleum analysis for GasBuddy, the national average price for a gallon of gasoline could increase five to 10 cents, reaching an average price of $3.58 for the week ending July 20.

Despite the challenges, it's vital to note that this surge in gasoline prices presents not just a risk, but also a potential opportunity. For both investors and business owners, a key strategy will be to adapt swiftly, manage risks effectively, and spot new possibilities in these changing dynamics.

Sources:

Bloomberg

Fox Business