Energy prices and your budget: Why costs are skyrocketing and how to save money
Energy prices have risen steadily over the last year.
Though the July Consumer Price Index (CPI) reports (opens in new tab)stated that while energy costs fell 4.6% last month, prices are still up 32.9% since that time last year. Energy prices included in the CPI include gasoline, heating oil, electricity, and utility gas services.
Energy costs are a burden on households across the country. Let’s explore why prices are so high and how to minimize the impact on your wallet.
What drives energy prices up?
According to the July 13 White House statement (opens in new tab)President Biden pointed to COVID-related economic problems as part of the rise in energy prices.
“One of the main reasons for this is the increased demand. When Covid restrictions eased, people started driving and flying again,” says Alan Duncan, Founder of Solar Panels Network USA.
With travel pent-up demand, Americans had big travel plans for the summer. A recent study by The Vacationer (opens in new tab) found that nearly 81% of Americans plan to travel in the summer of 2022.
Whether traveling by car or plane, everything other than a stay involves energy expenditure. And so, the increasing demand for travel has put pressure on energy prices.
Biden’s statement also mentioned that “Putin’s ruthless aggression” is aggravating the already tense economic situation around the world.
And by that he means the war in Ukraine, which has put pressure on energy costs around the world.
Will energy prices go down?
The July CPI report showed energy prices falling 4.6% last month. Despite the decline, electricity prices rose by 1.6% from the previous month. However, utility gas prices fell 3.6% and gasoline prices fell 7.7%.
Good news for everyone at the pump, AAA reported (opens in new tab) that the national average for gas prices fell below $4.00 per gallon in August. After gas prices peaked at $4.823 a gallon in mid-June (opens in new tab) On a national average, that’s a significant milestone that 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 new tab)The EIA forecasts that retail gas prices will fall to an average of $3.78 per gallon in the final quarter of 2022.
The good news doesn’t extend to other crucial energy needs, however. The EIA expects natural gas and electricity prices to remain high throughout 2022.
The complicated impact of global politics on energy costs makes it difficult to pinpoint an exact end of energy costs.
“It is unclear when energy prices will start falling again. I think it depends on what happens with the war in Ukraine. If this escalates, we could see prices continue to rise. However, when the situation stabilizes, we will see prices start to fall,” says Duncan.
3 creative ways to save energy
Only time will tell when energy prices start falling across the board. However, there are creative ways to reduce your other energy costs. Here are a few ideas to try:
supply discounts
If you’re struggling to keep up with your energy bills, the first option is to contact your utility company. Many energy suppliers offer special programs to help you pay your energy bills.
One possible benefit your provider might offer is an energy audit of your home, which will identify where there are opportunities to save energy in your home. Additionally, they may offer a billing option that splits your expected 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 energy supplier for help. You might be surprised at what they are willing to offer.
Tax Incentives
President Biden’s call for state gas tax exemptions (opens in new tab) has not yet come to fruition. But many states are taking steps to give residents a break from skyrocketing energy prices by offering gas rebates or inflation stimulus checks.
For example, the governor of Florida signed into law (opens in new tab) to make the month of October a gas holiday. This means that the gas price falls by 25.3 cents per month.
In New York, the governor suspended the state’s gas tax in June (opens in new tab) for a vacation by the end of the year.
If you live in a state that offers these tax saving opportunities, don’t hesitate to take advantage of them.
Other fiscal stimulus plans have been proposed to Congress to provide relief to Americans facing high energy prices, including a $100 federal stimulus check on gas.
Although the measure didn’t pass, it’s worth keeping an eye on potential tax incentives to keep your energy bills down.
State aid
Seeking government help is another way to keep your energy bills down. Specifically, the Low Income Home Energy Assistance Program (opens in new tab) (LIHEAP) provides 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 bills. Through the program, you could get help with weathering, energy-related home repairs, or home energy bills.
In addition to these high-level savings strategies, reducing your energy consumption is another way to reduce your costs. Although there is only so much you can do to reduce your energy consumption, simple strategies can result in significant savings.