The price of gas has risen significantly in the past week. The national average is over $4, and it doesn’t show signs of slowing down. So what caused this jump in prices at the pump? What’s being done nationally about it? How will this impact your company and what can you do about it? Let’s dive in.
After years of threatening to do so, Russia began its invasion of Ukraine. In retaliation, major traders and shipping companies have rejected Russian goods. Countries have leveled sanctions against the invading country as well. The U.S. specifically announced a ban on Imported goods from Russia including crude oil, natural gas and more. The result has created the desired effect and crashed the value of the Ruble. Unfortunately, Russia is one of the top producers of oil.
The U.S. is also one of the world’s biggest oil producers. During the pandemic, demand for oil plummeted. Oil production slowed to a halt and refineries are still returning to their full production levels. Unfortunately, it isn’t as easy as flipping a switch. Scaring the price up, however, does appear to be so easy. Speculators betting on the increasing price of oil are only fanning the flames.
Demand for oil has steadily increased over recent months, pushing prices higher. To ease prices, Biden ordered the release of a number of reserve oil. Even the release of millions of barrels is unlikely to have a major impact on the current price of gasoline. The White House is exploring other options to offset the loss of Russian crude such as increasing production with other major oil producers. UAE and Iraq have already announced an increase in production, considerably dropping the price.
Like many companies, yours relies on its driving workforce. Right now, your vehicle program might seem like the only choice in a list of bad options. Companies offering car allowances may find their drivers unable to cover their business mileage. Businesses might consider increasing allowance amounts or even issuing fuel cards to employees. Businesses with fleet vehicles will be staggered by gas card statements and the resulting increase in operational costs. Companies providing a mileage reimbursement may have employees complain their payment isn’t enough. Fortunately, you can improve on your situation.
Switching to a flexible vehicle program, one that can scale up and down with economic conditions, is the only option. That’s where the fixed and variable rate (FAVR) reimbursement comes in. With FAVR, employers reimburse employees for the fixed and variable costs of driving personal vehicles for business. These rates are calculated geographically to account for the costs employees actually incur and rates adjust frequently to reflect volatile costs like gas prices. That means paying employees specifically for what they’re owed, not an amount based on a national average. By implementing FAVR with the right company, companies can control costs and reduce administration. Interested in learning more about our FAVR offering?