The highest recorded average cost of a gallon of gas in South Dakota was during 2008, when the price per gallon was $4.09. AAA reported this month’s average at $3.94, just $0.15 away from the highest price South Dakotans have ever seen.
Sunday, March 27 marked the highest recorded price for diesel in the state at $4.80 per gallon.
Just a year ago, South Dakotans were paying an average of $2.84 for a gallon of gas and $3.15 for diesel.
Senior George Kellogg pays for his own gas but splits most of his finances with his fiance, alumna Elise Oren.
“When I am filling it up and it passes $50, I’m like this is just crazy for my car,” Kellogg said. He drives a Toyota Highlander.
It’s not just gas prices that are going up, either. As a family of two, Kellogg and Oren used to average around $215 for their weekly Hy-Vee grocery run.
“When we end up at the $200 mark and there’s still a good amount of groceries in the cart, I’m like, this is just wrong,” Kellogg said. “I really just get annoyed more than anything. I just kind of give up.”
The increase in prices is tied to U.S. inflation, which reached 7.9% in February.
“So when we talk about that 7.9%, it’s the consumer price index that gets put together by the Bureau of Labor Statistics,” economics professor Reynold Nesiba said. “They send people out into the world every month to go and look at the prices for goods that are bought by a typical urban consumer.”
Nesiba said the issue with high inflation is a disconnect between cost of living and compensation for living by employers. If employers cannot give their workers a 7.9% increase in wages to match the inflation, then consumers are losing purchasing power.
“As a college student, it’s especially hard just because I’m at school all day,” Kellogg said. “Like the only days I can work are Saturday and Sunday. My schedule is pretty packed. I’m at school every day, and then I work all weekends. And that’s barely getting me enough money just to live on my own while I’m in school.”
Kellogg said he and Oren live in a townhouse right now but that they are looking at houses to rent after he graduates.
“I think the timeline is drastically pushed back for people now,” Kellogg said. “I know Elise’s parents were married at 21 and had a house at the same year, which is just crazy to me because it’s looking like we’re going to have to wait a good year to save up money just to be able to get a mortgage or anything like that. Honestly, you need more time to do stuff. You need more time to make money because everything’s just more expensive now.”
The price of oil is one of the largest contributors to inflation. Not only are consumers purchasing more oil, but oil impacts the supply chain by increasing shipping and flying costs.
“We had this really sharp downturn a year ago at this time as the economy was collapsing,” Nesiba said. “There were COVID-19 restrictions being put on and just people being nervous about whether they could be out in public, whether it was safe to go to the grocery store or not. There was a sharp decrease in oil and gasoline prices as demand for that decreased.”
Nesiba said that during the pandemic consumers shifted away from purchasing experiences, like going to Disneyland or going out to eat. Demand for oil is back up now that COVID-19 restrictions are lifting and people are beginning to travel again.
“One of the things that is going to have an effect on that is that the federal reserve met and has started increasing interest rates,” Nesiba said. “And monetary policy is a really blunt instrument because what you’re effectively doing is saying if we increase the cost of borrowing, when they increase that overnight interest rate, that that affects all interest rates.”
By making spending more expensive, the goal is to drop overall demand to let costs level back out.
“But really we have to be careful how we talk about that,” Nesiba said. “We’re not talking about prices falling, what we’re talking about is prices increasing at a slower rate. I don’t think we’re going to see prices fall, or the rate of inflation I don’t think is going to fall or turn negative. I just think we’re going to see it temper out.”
However, inflation is not just a country-wide issue. The cost of a barrel of oil has worldwide effects, and the U.S. increasing interest rates also has effects on international students.
“As the U.S. begins to increase interest rates, economists would believe that that will lead to an increase in the value of the dollar,” Nesiba said. “And if that value of the dollar becomes more valuable relative to other currencies, and you’re a student that is here from Norway or Nigeria or Honduras or India, it’s possible that Augustana becomes more expensive to you in terms of your home country currency.”
President Stephanie Herseth Sandlin said she has heard some concerns from international students about exchange rates and the cost of an education in the U.S. The exchange rates may also have an effect on international enrollment for next year as well.
“I think it’s affected some of our international students because their currency sometimes isn’t as stable as ours,” Herseth Sandlin said. “And so we’ve heard from some international students that that’s already causing some pressures for them this spring.”
There’s also a level of uncertainty around the war in Russia and Ukraine. Nesiba said that even an unintentional attack on Poland would spark a war because of the NATO alliance, and the tensions in Eastern Europe should not be viewed as simply an inconvenience when it comes to oil prices.
“There’s people’s lives being destroyed right now,” Nesiba said. “And we shouldn’t ever forget when we’re talking about economies, we’re talking about people. The real loss, the real terror, is that people are being killed. Billions of people have been displaced. Their lives are being destroyed because of what’s going on there. And what effect that has on the cost of petroleum and inflation in the U.S. is really far down the list of horrors to be concerned about.”
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