Gas prices are trending back up after their slump in 2020. In April 2020, the regular conventional retail gasoline price was $1.72 a gallon. In April 2021, the cost for a gallon of gasoline was $2.77. That’s nearly a 40% increase. As of mid-May, the average price has risen even further to $3.09 per gallon.
As we head into the summer months and more people get out on the road, these prices are not expected to fall, either. According to a recent government report from the Energy Information Administration (EIA), gas prices are expected to climb to a three-year high this summer. Over the next six months (from April to September), prices at the pump are expected to average $2.78 per gallon. For businesses, this is likely to inflate employees’ mileage reporting.
Inflated Mileage Expenses
What businesses pay to employees who travel for work is greatly dependent on the standard mileage rate. This is a rate set each year by the IRS. This year, it’s 56 cents per business mile. When the standard mileage rate was announced for 2021, the estimated cost for a gallon of gas was expected to be around $2.22, over 50 cents lower than the current price, and Brent crude oil prices were forecasted to average $47 per barrel in 2021 (last month, they were already $65 per barrel). This means employees will be paying more at the pump this summer than was anticipated while still being reimbursed at the same standard mileage rate.
This is a common criticism of the IRS rate; it’s annual, and usually, they don’t update it as the costs of operating a vehicle fluctuate throughout the year. This can frustrate employees who may not feel like they’re being fairly compensated for the miles they travel for work in their own cars. When there is more disparity between the mileage rate announced by the IRS and the cost of gas in a year, you can expect employees to inflate their mileage expense reports accordingly.
Manage Mileage Reimbursement More Effectively
CompanyMileage can help you eliminate costs associated with mileage inflation and inaccurate expense reporting. With our mileage tracking app, SureMileage, employees report their starting and ending points of each trip, and the system calculates the most expedient driving route between them. The app then calculates the expenses to be reimbursed based on your predetermined rate. At no point will employees need to report odometer readings or maintain a mileage log.
Features such as an integrated Address Book and on-the-fly rate changes make it easy for employees to input their miles, adjust rates based on the vehicle used and save new destinations for future use. This summer, manage your mileage expenses with ease. Request a demo with CompanyMileage today.