Oil Prices Are Up and American Workers Are Feeling the Pinch

0:00I'm hopping in the car, starting up right now. Food delivery driver Lee Dahl gets his day started on Detroit's west side. He opens up the Uber Eats app to an offer.

0:10Scott Horsley:$7 for a total of 12 miles in estimated 34 minutes. You really can't make that happen. So he turns it down. Then he gets another request, this time at a Popeye's that's nine miles away. I can make$16, do it in 35, 40 minutes. I'm starting out of the gate good. Dahl uses a spreadsheet to meticulously track how much he makes delivering and how much he spends on gas. The math has been looking different recently due to the war the U.S. and Israel started against Iran. I'm really trying to keep my mileage down because a key metric for me having an older car is dollars per mile. One fifth of the world's oil supply used to move through the Strait of Hormuz.

0:58And now, because of the ongoing conflict, tanker traffic through the strait has come to a near standstill. And without that oil reaching the market, fuel costs are spiking everywhere, including for a gallon of gas where Dahl fills up. Everything's getting up around$4 in this particular area. The cost adds up. Dahl has had to change his delivery strategy. He is getting pickier and pickier about the orders he takes.

1:24Scott Horsley:I will take shorter orders that don't pay as much. Just take off the wear and tear and the gas. It may sound counterintuitive. And in the past for me, it was. I would take the best paying thing. Dahl is 65. He gets some income through Social Security, but says he needs the food delivery money to supplement that. I'm working at a poverty level. I don't have leverage in terms of a different career. And last year, I put over$7 ,000 in repairs and maintenance into my vehicle. Consider this. Oil prices have shot up since the U.S. and Israel started a war in the Middle East. How are American workers and businesses being affected?

2:14From NPR, I'm Scott Detrow.

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4:04It's Consider This from NPR. Oil prices rose again today as the U.S. war with Iran continues to disrupt global energy supplies. The world benchmark for oil is trading above$100 a barrel, and gasoline prices in the U.S. have jumped to an average of just under$4 a gallon. These are some of the most visible effects of the war so far. But there's likely to be broader economic fallout. In a moment, we will hear from some people whose jobs are already showing the strain of these higher fuel prices. First, though, we will get an overview from NPR's Scott Horsley. Mr. Horsley, thanks for joining us.

4:41Scott Horsley:Good to be with you. Iran has allowed just a few vessels to transit the Strait of Hormuz, but energy traffic in that area is just largely cut off. So what is that doing to prices? We've seen some big swings in prices over the last week as oil traders try to assess how long this might go on. Prices fell early in the week after President Trump hinted at a possible settlement. But that relief turned out to be short-lived, and today oil prices are back up again, although not as high as they had been. Brent crude, as you mentioned, is just over$100 a barrel. At the gas pump, prices have jumped about$1 a gallon since the war began.

5:16Scott Horsley:Diesel prices are up even more, about$1.60 a gallon. And all of this reflects a genuine supply crunch, not only for oil, but also for natural gas and fertilizer, as those shipments in the Middle East have really been disrupted by the war. And these are all things that factor into the prices of so many other things. Like, what's the best way to think about the broader impact of all of this on the U.S. economy? Well, it's not good. The more money people have to spend on gas, the less they have to spend on everything else that they want to buy. And the rise in diesel prices is ultimately going to mean higher costs for everything that has to be trucked around the country or travels by train, which is pretty much everything.

5:52Scott Horsley:Even before the war started, inflation had been inching up and economic growth had been slowing down and the war is likely to make both those headwinds worse. How much is hard to say. As Federal Reserve Chairman Jerome Powell said last week, nobody knows. A lot is going to depend on how long this goes on. But the Organization for Economic Cooperation and Development projects this will push U.S. inflation back above 4 % this year. not nearly as high as we saw in 2022, but not the direction anyone wants to see at a time when people are already frustrated about the cost of living. You know, wartime inflation will make it harder for the Federal Reserve to cut interest rates.

6:30Scott Horsley:And Freddie Mac said today mortgage rates, which had briefly dipped below 6%, are now back up around 6.4%. So that's not going to help with the sluggish housing market. So that is the big picture economic view. And Scott, I want you to So stick with me for a few minutes because I want to hear how this is playing out throughout the economy, how it's affecting people's jobs. And I want to start with the view of someone who is watching this from the wheel of a tractor trailer. Owning a truck, fuel is your biggest cost. It was pretty much a sticker shock when you were paying$3.89 a gallon or whatever, and you come out a weekend later and it's almost$5.

7:05Scott Horsley:Trucking is a penny business. My dad taught me that. He said, you take care of the penny, son, the dollars will take care of themselves. That's Monty Widerhold, who owns a small truck fleet in Ohio called BL Reaver Transport. He's been trucking for almost 50 years. His fleet moves products around the Midwest. Their long hauls average 300 miles. Small business truckers, we make up about 96 % of the fleets in the United States. So it makes it hard for the little guys to make the adjustments that the big guys can do because we don't roughly have the leverage. Widerhold says his company is always looking for ways to keep the costs down.

7:39We've always tried to eliminate idling instead of leaving the truck idle for 10 minutes or whatever while you're checking in.

7:45Scott Horsley:Do you shut the truck off by maybe driving a little bit slower? Those little things like that can help you save some money. He says he has faced a lot of highs and a lot of lows in his five decades in the trucking business and feels like he can probably get through this moment. But he is worried about what will happen if gas prices get much higher and stay there. I heard the other day out in Connecticut, there was a truck stop that was charging$8.31 a gallon for fuel. If that fuel goes to that level and stays there for an extended period of time, our economy, our country is going to be in a real hurt, I think.

8:18Weiderhold feels like no matter what business you are in, increases in energy costs will trickle down to everyone.

8:23Scott Horsley:We're all consumers, so in the end we're all going to pay for this. We're all going to feel it. Justin Madeira agrees that everybody's going to feel the hit if oil prices stay high. And at the same time, though, he is confident it won't get to that. I'm very confident that the business acumen of someone like Donald Trump is well aware of this, and he's not going to let this get prolonged. Justin and his brother, Travis Madeira, are fourth generation lobster fishermen. They are the owners of Lobster Boys, a lobster wholesale business based on Long Island. Their company has an e-commerce website that sells lobsters domestically and internationally, sourcing their lobsters directly from Canadian fishermen.

9:00Fuel plays a role in all parts of their business. Travis says the fishermen he talks to are concerned about fuel costs. These guys, you know, they're buying 1 ,000 gallons, probably like minimum, to fuel in their boat. So it's a lot when it all adds up. And then there's the cost of distribution. All our lobsters come down from Canada, down to our U.S. facility on long-haul trucks, whether it's our internal truck or an outside trucker, you know, company that we hired. So the cost of that, they've tried to raise our rates. Our fuel rates have gone up. and then jet fuel if we're using outside airlines.

9:31Another important factor for the company, lobsters aren't necessarily a need. So demand could go down if families don't have the extra money to treat themselves to lobster in the coming months. Because this happens in our industry, like it's a seasonal business. So it's a double whammy on a product like ours. Justin and Travis Madeira say they're going to have to eat the cost themselves if fuel prices don't go down, but they do feel confident that this is a short-term issue. Unless this is somehow over the next couple of weeks not resolved in a significant way that the traffic through the Strait of Hormuz is opened up, then we're just going to maintain normal operations and eat the cost.

10:09Everyone's going to eat it, including FedEx, including us, including the fishermen, because we all believe that this is short term. Scott Horsley, you've been listening to this. The thing I want to eat right now is lobster. But let's push past that. And you're hearing some confidence there that the economic pain of this war won't necessarily stick around very long. How realistic is that view?

10:30Scott Horsley:Well, let's hope the lobster boys are right. I will say the U.S. economy has withstood a lot of shocks in recent years and has generally held up better than a lot of forecasters might have expected. We do have some things going for us. For one, the overall economy is much more energy efficient than it once was. You know, the average family spends only about 2 % of its budget on gasoline. We were spending about two and a half times that share back in 1979 at the time of the Iranian revolution. That said, the longer fuel prices stay elevated, the more we're going to feel those ripple effects on the cost of everything else.

10:59Let's say there is an agreement the war ends this week, right? How long would it take for prices to start to come down?

11:06Scott Horsley:You know, energy prices tend to go up quickly when supplies are disrupted and then take their time in coming down. Even when the Strait of Hormuz is reopened to normal traffic, it's going to take time to repair some of the damaged infrastructure, to reopen wells that have been shut in. We heard Justin Madeira say he's confident the president's business acumen will lead him to end this war quickly. Certainly, Trump would seem to have every incentive to do so, to help his own political standing. But, you know, the Iranians also have a say. So while it was the president's choice to start this war, it may not be entirely up to him to decide when it ends.

11:39That is NPR's Scott Horsley. Scott, do you want to give your home address for the lobster delivery, or should we do that later?

11:45Scott Horsley:I'll start the butter. This episode was produced by Mia Venkat with audio engineering by Hannah Glovna. It was edited by William Troop, Raphael Nam, and Maureen Powell. NPR's correspondent, Bill Chappell, contributed to the reporting in this episode. Our executive producer is Sammy Yannigan.

12:03It's Consider This from NPR. I'm Scott Detra. This message comes from Rosetta Stone. Spring travel coming up? Rosetta Stone has been the trusted leader in language learning for over 30 years. Ready to start learning a new language this spring? Visit rosettastone.com slash NPR today. Support for NPR and the following message come from the William and Flora Hewlett Foundation. Investing in creative thinkers and problem solvers who help people, communities, and the planet flourish. More information is available at Hewlett.org.

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