BIRMINGHAM, Ala. (WBRC) – 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.
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.”
Ships in the Strait of Hormuz(CENTCOM)
He explained that disruptions in that region are limiting the flow of oil into global markets.
“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.”
That disruption is creating what economists call a “stock and flow” problem.
“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.”
Not a seasonal spike
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.”
Instead, he says the increase is being driven almost entirely by supply-side constraints.
“This is supply side, and that’s where the price increase is coming from,” Meadows said.
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.”
As for when relief might come, Meadows says it’s too early to say.
“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.”
Why U.S. production doesn’t shield consumers
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.”
Oil refining process(KFYR-TV)
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.”
That creates a dilemma for domestic consumers.
“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.”
Ripple effects across the economy
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.”
Grocery shopping. (Kwangmoozaa – stock.adobe.com)
Those higher transportation costs are passed along to consumers.
“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.”
Who is hit the hardest?
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.”
That lack of flexibility means those with limited financial resources feel the burden more acutely.
“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.”
Why Alabama prices are lower than the national average
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.”
Max Transit bus(Birmingham-Jefferson County Transit Authority | MAX Transit)Mounting financial pressure on families
Beyond gas, Meadows says Alabama families are facing pressure across multiple fronts, including insurance, groceries and utilities.
He noted that insurance premiums alone are rising significantly.
“There are some estimates that have… health insurance going up by 10 to 20%,” Meadows said.
As essential costs rise, families are forced to cut back elsewhere.
“Folks have a set level of their budget,” he said. “That means that there’s less discretionary spending… something has to give.”
Budgeting at home(Lumos sp – stock.adobe.com)What economists are watching next
Looking ahead, Meadows says economists are closely monitoring oil markets and upcoming inflation reports.
“Economists are hyper-vigilant right now about what’s going on in oil markets,” he said.
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.”
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