As gas prices continue to climb across Alabama, a University of Alabama at Birmingham (UAB) economist says the spike is being driven by global supply disruptions, not typical seasonal demand, and could have far-reaching effects on the broader economy.
) - As gas prices continue to climb across Alabama , a University of Alabama at Birmingham economist says the spike is being driven by global supply disruptions, Dr. Ben Meadows , an assistant professor of economics at UAB ’s Collat School of Business, points to geopolitical tensions and constrained oil flow through a critical global shipping route as a key factor behind rising costs.
“So, when we think about what’s going on right now geopolitically with petroleum products, right? ” Meadows said.
“A large percentage of our petroleum products, so that is crude oil, natural gas, and even helium… all of that goes through the Strait of Hormuz. ”“The issue we have right now is that if we are not having a lot of shipping traffic getting through the Strait of Hormuz, we don’t have basically oil flowing,” Meadows said.
“Every day that the Strait doesn’t see normal shipping traffic… the flow of oil has been cut off. ”“How much stock of oil have we lost for every day that the Strait isn’t behaving typically? ” he said.
“By some estimates… you’ve got basically 400 million barrels of oil that are not on the market. So, if you think about that, that is a huge supply crump… there’s not enough stock. And so, prices have gone up tremendously around the world. ”While gas prices typically rise in the summer due to increased travel, Meadows says this surge is different.
“No, this is not a seasonally induced price spike,” he said. “If we looked at June 2025, gas prices in Alabama would be about a dollar per gallon cheaper. So, this is something that’s kind of outside the norm of seasonal gas prices. ”Why prices remain high According to Meadows, prices are likely to stay elevated as long as global oil flow remains disrupted.
“Prices remain elevated, because the flow… has not returned to normal,” he said. “Every day that it doesn’t return to normal… we kind of have a backlog of oil that’s not coming through. ”“It’s really hard to predict gas prices in the future when there’s a great deal of uncertainty right now,” he said.
“We’re going to have to… wait for more information to come out to really understand kind of where this… supply and demand dynamics… will be dictating the rest of the year. ”Despite the U.S. being one of the world’s largest oil producers, Americans are still feeling the impact of global price increases.
“You have to think that oil is a global commodity,” Meadows said. “Because the world price of oil is set by everyone… thousands, tens of thousands… in the market buying and selling oil. ”He explained that even though the U.S. produces a significant portion of the world’s oil, it doesn’t control prices.
“The U.S. is around 20 to 30% of the world’s oil. We’re the number one. But notice that’s not the majority of oil,” Meadows said.
“So we don’t have the ability to set prices. The world market… sets the price. ”“If a guy in Louisiana is holding a barrel of oil right now, should he sell it in America for cheap… or should he sell it for the highest price on the world stage? ” Meadows said.
“It’s better for our producers to sell on the world stage, even if that’s more expensive for consumers. ”Rising gas prices are also contributing to broader inflation, impacting everything from groceries to online shopping.
“Gas prices don’t stay in a bucket,” Meadows said. “They ripple out into the economy because they increase shipping costs. ”“Whether you’re buying something on Amazon or from the grocery store, transportation costs ripple outwards,” he said.
“As long as these oil prices stay elevated, we’re going to see kind of price waves ripple through the economy. ”Meadows says lower-income households are especially vulnerable due to the nature of gasoline demand.
“Gasoline is a very inelastic good,” he said. “If gas prices go up by a dollar a gallon, I still have to get to work tomorrow… I will still buy gas. ”“For folks who are of limited means, they’re going to be the ones who are impacted the most,” Meadows said.
“They have the least bandwidth to kind of adjust. ”Even with rising costs, Alabama’s gas prices remain below the national average, something Meadows attributes to basic economics.
“Alabama sees below average gas prices probably as an artifact of just averages working the way they do,” he said. “There are going to be some states that have higher prices… and others that have access to easy transportation networks. ” Beyond gas, Meadows says Alabama families are facing pressure across multiple fronts, including insurance, groceries and utilities.
“There are some estimates that have… health insurance going up by 10 to 20%,” Meadows said. “Folks have a set level of their budget,” he said. “That means that there’s less discretionary spending… something has to give. ” Looking ahead, Meadows says economists are closely monitoring oil markets and upcoming inflation reports.
He also pointed to the Federal Reserve’s ongoing challenge of balancing inflation and employment.
“They’ve got to keep employment high and inflation low, and those are countervailing forces,” Meadows said. For now, uncertainty remains the dominant theme, with Meadows saying, “I think we just have a lot of questions right now and not a lot of answers. ”Mobile man, first in Alabama convicted under gang law, sentenced to 25 years in marijuana caseMobile Police investigating shooting in west Mobile Sunday morningHelp available for McIntosh BASF employees facing layoff
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