Oil prices reaching $60 per barrel, coupled with the crisis unfolding in the Suez Canal, are set to send gas prices soaring this summer, just as consumers are hoping mass vaccinations will usher in a return to normal.
On Tuesday, an ultra-large container ship attempting to navigate the Suez Canal ran aground amid high winds, blocking one of the world’s biggest key trade routes. While U.S. apparel importers typically bring in goods from Asia through the West Coast ports at Los Angeles and Long Beach, the Suez Canal remains one of the vital transit routes shipping barrels of crude oil.
Gasoline prices are averaging $2.89 nationally, but already hitting $3 per gallon in some states. The canal blockage could result in $3 becoming the norm before the summer starts.
Of course, recent Texas storms that halted domestic oil production didn’t help matters, and contributed to the rise in gas prices. But a hike in crude oil prices could be next.
In addition to uses in heating, electricity and transportation fuels like diesel and gasoline, crude oil is a critical petrochemical feedstock for goods like plastics, dishwashing liquid and toys.
Personal care products like soap, cosmetics and shampoo are derived from petroleum, while petroleum-based fibers include rayon, polyester, nylon and spandex. In the home sector, many construction materials are derived from the commodity, from pillows and rugs to house paint, according to the CAPP, the organization for Canada’s oil and natural gas producers.
It isn’t immediately clear how long the Suez Canal blockage might last, though after more than one failed attempt to rescue the ship experts estimate the crisis could last weeks. One thing is clear—the higher costs will impact everyone. Truckers need to put gas in their tanks to ship food and other daily necessities. Higher gas prices translate into higher costs for companies and retailers. And for products derived from a petroleum base, the cost of production will go up too. Eventually those higher costs get passed on to consumers.
All that leaves less discretionary income that’s available for spending elsewhere, such as for apparel, footwear and even some home goods.