The United States war in Iran has caused a spike in gas prices that now costs Kentuckians $175 million a month, according to a new analysis by the Institute on Taxation and Economic Policy.
That’s an additional $46.69 each month for every Kentucky driver, the fourth-worst increase among all states. At a time when many Kentuckians are already struggling with the cost of living, the gas price surge is further reason for public action to address affordability.
In a rural state and for those who drive for work, gas prices especially matter
Transportation is the single largest expense in basic family budgets across many Kentucky counties, according to the Economic Policy Institute. For example, a family of four in Boyd County needs $86,241 a year to make ends meet. Of that, $16,300 is for transportation. Transportation expenses have already increased dramatically in recent years. Since 2020, the cost of new and used cars is up 25% according to the Consumer Price Index, car maintenance and repair is up 48% and car insurance is up 55%.
As a rural state, Kentucky is particularly burdened by spikes in transportation costs. Analysis by the Kentucky Center for Statistics shows that more Kentuckians commute to a different county for work than those who live and work in the same county. Workers in rural counties like Elliott, Hickman, Martin and Fulton have the longest average commute to employment, and more than 40% of workers in the eastern Kentucky labor workforce areas commute outside that region for their jobs.
Kentucky’s central location makes it a prime logistics state, and many Kentuckians work in transportation-related jobs where gas prices are a major expense. The state has 33,430 heavy and tractor-trailer truck drivers, a portion of whom are independent contractors that pay for gas out of their own pockets. Taxi, rideshare and delivery drivers, landscapers, salespeople, realtors, mobile service technicians, care providers and more are also especially harmed by rising transportation costs.
And Kentuckians won’t just feel higher gas prices at the pump. Secondary impacts include higher grocery prices, more expensive retail goods that are often shipped from far away, and a potential slowdown in the overall economy.
Transportation strain must be addressed as part of affordability agenda
It will take public policy to ease the pain resulting from the gas price hike. Most importantly and immediately, the war in Iran is cutting off oil supplies and directly causing the price increase. Ending that conflict will bring the price of gas down over time.
Gas prices are also just one part of a cost-of-living crisis that can be addressed in ways KyPolicy outlined in our recent affordability policy agenda. Policy options to put more money in people’s pockets include raising the minimum wage, supporting the growth of unions and creating a state child tax credit. Governor Beshear’s recent budget plan also included a number of proposals to provide one-time affordability payments to struggling Kentuckians using dollars built up in the Budget Reserve Trust Fund.
Action is also needed on long-term solutions to make transportation more affordable. Policy can support the transition to electric vehicles (EV) to no longer make driving costs subject to volatile oil prices. Unfortunately, Congress recently eliminated the $7,500 tax credit for the purchase of EVs, a decision that has hampered the market and likely led to the shuttering of the Ford Blue Oval SK battery plant in Hardin County that was employing thousands of workers who had just won union representation. Kentucky’s low spending on public transit can also be expanded, and investment in road maintenance can help reduce expensive wear-and-tear on vehicles. In addition, states like Kentucky can better use their regulatory and financing powers to make car insurance more affordable.
