Energy prices have been on a relentless rise for the last year.
Although the July Consumer Price Index (CPI) report (opens in new tab)indicated that energy costs dropped by 4.6% last month, prices are still up 32.9% since this time last year. Energy prices considered within the CPI include gasoline, fuel oil, electricity, and utility gas services.
Energy costs put a strain on budgets across the country. Let’s explore why prices are so high and how you can minimize the impact on your wallet.
What’s driving energy prices higher?
According to the White House’s statement on July 13 (opens in new tab), President Biden pointed toward COVID-related economic problems as a part of the rise in energy prices.
“One of the main reasons for this is increased demand. When 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 new tab) found that nearly 81% of Americans planned to travel during the summer of 2022.
Whether traveling by car or plane, anything other than a staycation involves consuming energy. And so, the rising demand for travel has put pressure on energy prices.
Biden’s statement also mentioned that “Putin’s unconscionable aggression” is exacerbating the already tenuous economic situation around the world.
And by that, he is referring to the war in Ukraine, which has put pressure on energy costs on a global level.
Will energy prices drop?
The July CPI report recorded a reduction of 4.6% in energy prices in the last month. Even with the drop, electricity prices still increased by 1.6% since the previous month. But utility gas service prices dropped by 3.6%, and gasoline prices decreased by 7.7%.
In good news for everyone at the pump, AAA reported (opens in new tab) that the national average for gas prices dropped below $4.00 per gallon in August. After gas prices peaked in mid-June at $4.823 per gallon (opens in new tab) on average across the nation, that’s a significant milestone that we haven’t seen since March 2022.
And the U.S. Energy Information Administration (EIA) expects the downward trend of gas prices to continue. In an August energy outlook report (opens in new tab), the EIA predicts that retail gas prices will fall to an average of $3.78 per gallon in the final quarter of 2022.
However, the good news doesn’t extend to other crucial energy needs. The EIA expects natural gas and electricity prices to stay high throughout 2022.
The complicated impacts of global politics on energy costs make determining an exact end to energy costs difficult.
“It’s unclear exactly when energy prices will start to drop again. I think it depends on what happens with the war in Ukraine. If that escalates, then we could see prices continue to rise. However, if the situation stabilizes, then we may see prices start to come down,” says Duncan.
3 creative ways to save on energy
Only time will tell us exactly when energy prices will start to fall across the board. However, there are creative ways to lower your other energy costs. Here are a few ideas to try:
If you are struggling to keep up with your energy payments, the first option is to reach out to your utility provider. Many utility providers offer specialized programs to help you afford your energy bills.
One potential perk your provider could offer is an energy audit of your home, pointing out where there are opportunities to save on energy within your home. Additionally, they may offer a billing option that divides your expected energy costs into equal monthly payments to make budgeting easier.
Finally, some energy companies may offer you an extended payment plan or a temporary discount. It never hurts to ask your utility provider for a helping hand. You might be surprised by what they are willing to offer.
President Biden’s call for a federal gas tax holiday (opens in new tab) hasn’t come to fruition yet. But many states are taking action to give residents a break from sky-high energy prices by providing gas rebates or inflation stimulus checks.
For example, Florida’s governor signed legislation (opens in new tab) to make the month of October a gas holiday. With that, the price of gas will decrease by 25.3 cents for the month.
In New York, the governor suspended the state’s gas tax in June (opens in new tab) for a holiday lasting until the end of the year.
If you live in a state offering these tax savings opportunities, don’t hesitate to take advantage.
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 hasn’t been passed, it’s worth keeping an eye on potential tax incentives to keep your energy costs down.
Seeking out government aid is another way to keep your energy costs low. Specifically, the Low Income Home Energy Assistance Program (opens in new tab) (LIHEAP) offers utility assistance to qualifying households.
The Office of Community Services administers the program in an effort to keep families safe and healthy by providing help with energy costs. Through the program, you could get help with weatherization, energy-related home repairs, or home energy bills.
Beyond these high-level savings strategies, lowering your energy consumption is another way to reduce your costs. Although you can only cut so much energy consumption out of your life, simple strategies could lead to significant savings.