Energy prices have been rising steadily for a year.
Although the July Consumer Price Index (CPI) report (opens in a new tab)indicated that energy costs fell 4.6% last month, prices are still up 32.9% since this time last year. Energy prices included in the CPI include gasoline, fuel oil, electricity, and gas utilities.
Energy costs are weighing on budgets across the country. Let’s explore why the prices are so high and how you can minimize the impact on your wallet.
What drives up energy prices?
According to the July 13 White House statement (opens in a new tab)President Biden has highlighted COVID-related economic issues amid rising energy prices.
“One of the main reasons for this is the increase in demand. When the Covid restrictions eased, people started driving and flying again,” says Alan Duncan, founder of Solar Panels Network USA.
With pent-up demand for travel, Americans had big travel plans for the summer. A recent study by The Vacationer (opens in a new tab) found that nearly 81% of Americans plan to travel in the summer of 2022.
Whether you travel by car or plane, anything other than a staycation involves consuming energy. Thus, the growing demand for travel has put pressure on energy prices.
Biden’s statement also mentioned that “Putin’s unconscionable aggression” is exacerbating the already precarious economic situation around the world.
And by that, he is referring to the war in Ukraine, which has put pressure on energy costs globally.
Will energy prices go down?
The July CPI report recorded a 4.6% reduction in energy prices over the past month. Even with the drop, electricity prices still rose 1.6% from the previous month. But gas utility prices fell 3.6% and gasoline prices fell 7.7%.
Good news for everyone at the pump, AAA reported (opens in a new tab) that the national average for gasoline prices fell below $4.00 per gallon in August. After gasoline prices peaked in mid-June at $4.823 a gallon (opens in a new tab) on average across the country, this is a milestone we haven’t seen since March 2022.
And the US Energy Information Administration (EIA) expects the downward trend in gas prices to continue. In an August Energy Outlook report (opens in a new tab)the EIA forecasts retail gasoline prices to fall to an average of $3.78 per gallon in the last quarter of 2022.
However, the good news does not extend to other critical energy needs. The EIA expects natural gas and electricity prices to remain high throughout 2022.
The complicated impacts of global politics on energy costs make it difficult to determine an exact end to energy costs.
“It’s unclear exactly when energy prices will start falling again. I think it depends on what happens with the war in Ukraine. If it gets worse, we could see prices continue to rise. However, if the situation stabilizes, we could see prices start to come down,” says Duncan.
3 creative ways to save energy
Only time will tell exactly when energy prices will begin to decline across the board. However, there are creative ways to reduce your other energy costs. Here are some ideas to try:
If you are having trouble keeping up with your energy payments, the first option is to contact your utility provider. Many utility providers offer specialized programs to help you pay your energy bills.
One potential benefit your supplier might offer is an energy audit of your home, showing where there are energy saving opportunities in your home. Additionally, they may offer a billing option that divides your projected energy costs into equal monthly payments for easier budgeting.
Finally, some energy companies may offer you an extended payment plan or a temporary discount. It never hurts to ask your utility provider for help. You might be surprised by what they are ready to offer.
President Biden’s Call for a Federal Gas Tax Waiver (opens in a new tab) has not yet come to fruition. But many states are taking steps to give residents a break from sky-high energy prices by offering gasoline rebates or inflation stimulus checks.
For example, the governor of Florida signed a law (opens in a new tab) to make October a gas festival. With this, the price of gasoline will decrease by 25.3 cents for the month.
In New York, the governor suspended the state’s gas tax in June (opens in a new tab) for holidays that last until the end of the year.
If you live in a state that offers these tax savings opportunities, feel free to take advantage of them.
Other tax incentives intended to provide relief to Americans facing high energy prices have been proposed to Congress, including a $100 federal gas stimulus check.
Although the measure did not pass, it is worth keeping an eye out for potential tax incentives to reduce your energy costs.
Applying for government grants is another way to reduce your energy costs. Specifically, the Low-Income Home Energy Assistance Program (opens in a new tab) (LIHEAP) provides utility assistance to eligible households.
The Community Services Office administers the program with the goal of keeping families safe and healthy by providing assistance with energy costs. Through the program, you could get help with weatherization, energy-related home repairs, or household energy bills.
Beyond these high-level savings strategies, lowering your energy consumption is another way to lower your costs. Although you can only reduce your energy consumption to a certain extent, simple strategies could lead to significant savings.