Gas Prices Are Rising. What Does This Mean for Mobile Employees?

It might be time to start discussing the harsh realities of high gas prices for businesses again. Recently, oil prices (temporarily) topped $100 a barrel, a high not seen since 2022, in the wake of the U.S.-Israeli war with Iran. Because of that same conflict, gas prices rose 48 cents between March 2nd and 9th, with prices hitting upwards of $5/gallon in California.

For most people, spikes in fuel costs are an inconvenience, but not much more. For mobile employees who get reimbursed for their work-related travel in their personal vehicles, on the other hand, those spikes have a direct impact on their ability to do their jobs. In this article we’ll discuss why costs are high, and how the IRS (and your business) might respond. 

What’s Driving the Increase?

Currently, gas prices are ballooning because of the United States’ and Israel’s war with Iran, which began at the beginning of March of this year. Iran borders the north side of the Strait of Hormuz, the world’s most critical oil chokepoint. Roughly 20% of the world’s oil, or about 15 million barrels of crude oil, are shipped through the Strait of Hormuz daily. The war has stalled shipments through the strait, while retaliatory attacks dent oil production, driving up gas prices.

How Long Could This Last?

It’s not entirely clear how long this conflict and ensuing oil costs will last. Currently the war is causing a daily loss of about 20 million barrels from the global oil market, which experts are calling “the biggest disruption the world’s oil market has ever seen.” 

The most optimistic forecasts suggest that if the war ends soon, high gas prices may still last well into April. Others are less sure, with Goldman Sachs, JPMorgan, and UBS all revising their gas cost forecasts upward. Some of those forecasts suggest that prices may ease closer to their pre-conflict baselines in the fourth quarter; UBS’ forecast currently predicts that by the end of this year crude oil will cost $65-67 per barrel, down from where it’s currently about $97. But even those more optimistic forecasts don’t predict a quick, easy snapback. 

What Does This Mean for Mobile Workers?

High gas prices can take a direct financial toll on mobile employees who get reimbursed for their day-to-day travel. When employees have to pay more out of pocket to fill up their vehicle, directly reducing their net take-home pay from reimbursement. Even the smallest increases can add up fast over thousands of miles. Because reimbursement rates tend to be fixed and don’t move automatically, that gap between actual costs and reimbursement pay can widen without employers even noticing. 

Could We See a Mid-Year Rate Adjustment From the IRS? 

At the end of every year, in preparation for the next one, the IRS analyzes national costs of owning and operating a vehicle, and uses that data to determine the standard rate of reimbursement. Currently, the IRS standard mileage rate is 72.5 cents per gallon. Businesses that reimburse their mobile employees are not required to do so at the IRS rate, but many still do out of convenience. 

It’s rare, but the IRS has occasionally been known to change the standard mileage rate midyear to adjust for unexpected increases to the cost of owning and operating a vehicle. This happened in June of 2011, as well as in June of 2022 when the rate increased from 58.5 to 62.5 cents per mile. Both of these increases were caused by a sharp increase in gas prices due to global events—Arab Spring protests and ensuing conflicts in 2011, and Russia’s invasion of Ukraine (plus supply line complications post COVID-19 pandemic) in 2022.

So will that happen this year? Time will tell, but we wouldn’t rule it out yet, either. In both of the above instances, national gas prices rose above $4 a gallon, spurred by instability from global conflicts. While national gas prices have yet to push as far as $4, they might do so soon if war and unrest continues to impact oil shipping and production. 

Stay On Top of Employee Mileage Reimbursement With CompanyMileage

It’s not news that vehicle costs can creep up on you quickly. It’s important for businesses with mobile employees to stay familiar with the reality of costs as they change, so those businesses can respond to changes effectively. Consider getting some help from CompanyMileage and our suite of software solutions that both simplify and optimize the mileage reimbursement process.

SureMileage, our mileage reimbursement software, automates the entire process using our unique point-to-point calculation method. Mobile employees simply enter the start and end point of each work-related trip and the system automatically calculates the best route and reimbursement. This takes the onus of logging and calculating mileage off of the employees, while ensuring that side trips, inflated mileage, and duplicate reports don’t make their way into reimbursement reports, or the ensuing payments. 

SureMileage also makes it easy to adjust your company’s rate of reimbursement in the system. Let’s say you’ve been using the standard mileage rate to reimburse mobile employees, but gas prices have been so high that that rate no longer works for your company. With our free rate calculator, businesses can use the cost of gas in their area to determine a more region-accurate rate, which will automatically apply to logged mileage for reimbursement once the rate is changed in SureMileage. 

You’ll never be able to plan for everything, but CompanyMileage is here to help you roll with the punches. To learn more about what we can do to help your business, contact us for a demo today!