Impacts of rising oil prices on U.S. businesses
The price of oil is on everyone’s mind and not just because the price of gas for your car has gone up but soon, for everything else. It affects businesses too, such as the cost of transporting the goods they use or resell. It also affects manufacturers that make products that use petroleum, like products made from plastic. This then leads to businesses fretting about how the spike in oil will affect all different aspects of their operations.
It also affects the classic supply and demand dynamic. Where demand diminishes, where except for gasoline in their car being ‘inelastic’ (they have to use it to drive their car to work). But, with other products or services it becomes ‘elastic’ - e.g. where businesses start to see consumers tightening their belt and cutting back on non-essential purchases. Consumers then start budgeting their finances to hold off on making purchases in other areas.
And, with the U.S. job growth #'s report released on April 3rd, 2026 - showing that revised numbers for February are sharply lower, from -92,000 to -133,000 jobs, marking the largest monthly job loss since December 2020, thigs are getting dicey. What happens next, with higher oil prices, inflation increasing and lower growth? The dreaded word, stagflation. “Gasoline drives the affordability issue,” says Senator Thom Tillis, so it leaves Americans wondering what next they’ll struggle to afford.
As we said above, for now - despite consumers seeing the cost to fill their tank skyrocket, since it’s inelastic, people will continue to buy gas for their car but they will likely cut back on other items. And, for companies relying on raw materials that require high energy for production or transport - such as airlines, trains, and trucks to transport good - they will continue to buy high-priced fuels, since they have no choice but to adapt - it’s (oil) the critical element to their only service (e.g. the airlines sole mission is to transports their customers).
The other dilemma, question is, how much can a business absorb when it comes to higher production costs? Businesses will have to choose between absorbing costs or raising prices, like they had to do with tariffs.
This is definitely another one of our ‘stay tuned’ blog posts.
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Sources:
Iran war underscores risks of Trump's focus on oil | AP News
