U.S. shoppers should brace for impact of higher oil prices, experts say
(CBS NEWS) – According to CBS News, for U.S. consumers, soaring oil prices due to the Iran war don’t just mean pain at the pump — the impact is also likely to be felt by shoppers both in stores and online.
Global oil prices have jumped more than 40% since the conflict effectively closed the Strait of Hormuz, a critical waterway in the Persian Gulf that normally accommodates roughly a fifth of the world’s oil and natural gas supply.
That surge is affecting every link in the U.S. supply chain. From cargo ships crossing the ocean to the delivery van pulling up to your door, rising fuel and other energy prices are driving up the cost of transporting goods.
Diane Swonk, chief economist at KPMG, told CBS News that “all of those shifts are adding to costs, a portion of which will be passed along to consumers.”
“The costs that are not passed along show up as a squeeze in profit margins and employment,” she added.
A barrel of Brent crude, the international standard, on Friday cost $108.84 after selling for around $70 just before the U.S and Israel attacked Iran on February 28.
As of March 20, the average U.S. gas price had jumped to $3.92 per gallon, up 29 cents from a week ago and nearly $1 a gallon from February 20, according to AAA.
“Headline inflation… will rise sharply in March and April, mostly due to gasoline prices, and inflation will remain stronger as the disruption pushes up food prices and other items,” Bernard Yaros, lead U.S. economist at Oxford Economics, said in a report on Friday.
“Rock and a hard place”
Stew Leonard, owner of an East Coast grocery chain with annual sales of more than $500 million, expressed concern about the impact of higher energy prices on the company’s suppliers, while noting that it is holding off on hiking prices for now.
“Stew Leonard’s has not felt the impact of rising oil prices, but our farmers, ranchers and fishermen are knocking on the door right now with fuel surcharges. We’re caught between a rock and a hard place. Customers are already feeling the pain of food, energy and insurance bills in their personal lives, and I’m going to resist raising prices until the cows come home.”
Not every retailer will feel the pinch equally. Logistics expert Satish Jindel of ShipMatrix said retailers with lower-value items will be the hardest hit by increased shipping costs.
“They don’t have enough in margins — they’ll need to raise prices.” Jindel said, pointing to retailers including Dollar Tree, Family Dollar, Marshalls and TJ Maxx among those likely feeling the impact of elevated energy costs.
Fuel surcharges
For online shoppers, the impact of sharply higher oil costs may show up not just in the price of some products, but also in shipping and delivery costs.
“Most people ordering online, they expect normal delivery for free — the moment you ask them even for five dollars, they will abandon the cart,” Jindel said.
Instead, he expects many stores to raise the purchase minimums required to qualify for free shipping.
Fuel costs for shipping are already climbing. According to data from ShipMatrix, fuel surcharges as a portion of shipping fees have climbed 17% in three weeks.
“The biggest problem that shipping has is when the ships are working, they’re out of sight and mind,” G. Allen Brooks, a senior fellow at the National Center for Energy Analytics, told CBS News. Consumers will “see the price increases, and they won’t fully understand why.”
