The price of a gallon of gas continued to rise over the weekend along with oil prices in the aftermath of reports that the Biden Administration is seeking a ban on Russian oil in response to the country’s invasion of Ukraine.
The average price for a regular gallon of gas hit more than $4 for the first time since 2008, according to AAA. In California, the average hit more than $5.
That sent stocks plunging on Monday. The S&P 500 index closed down 3%. And restaurants were particularly hard hit. The S&P 500 Restaurants Index fell nearly 6%. Casual dining chains were hit particularly hard: Outback Steakhouse owner Bloomin’ Brands fell 18% on the day. Brinker International, Dave & Buster’s, Red Robin and Texas Roadhouse all closed down 15%. Cheesecake Factory, Darden and BJ’s Restaurants all closed down more than 10%.
Several other restaurant chains traded at or near their 52-week lows. And companies that serve restaurants, like US Foods and Sysco, also saw steep declines in their stock prices.
The spiking fuel prices are adding to the inflation concerns hitting Americans, including soaring increases in the cost of food, rent and household goods. They also threaten to worsen the cost of commodities even as some concerns about pandemic-related labor-cost inflation begin to subside.
Gas prices tend to have a dual impact on restaurants, most immediately by raising costs for average consumers and causing them to cut spending in some areas. Until recently, consumers had largely shrugged off those prices and continued spending at restaurants.
“We believe folks have gotten more used to generally higher inflation right now,” Cracker Barrel CFO Craig Pommells told investors last month, according to a transcript on the financial services site Sentieo. “So we think that will mitigate what we would normally see at these gas price levels.”
But, he added, “if gas prices go up significantly from here, that might change the outlook.”
That is exactly what’s happened since he made those comments. Gas prices are up nearly 13% over the past week and are up more than 18% over the past month.
They are also up nearly 50% over the past year, according to AAA.
Oil prices have spiked after Russia invaded Ukraine. That worsened over the weekend, after U.S. Secretary of State Anthony Blinken told CNN that President Biden was talking with European nations about sanctions on Russian oil.
Russia is a major producer of oil, but it is not a major source for the U.S. Russia is the source of about 7% of oil imports, which represent less than half of domestic consumption.
That apparently isn’t stopping oil or gas prices. The price of crude oil spiked over the weekend, briefly hitting $130 a barrel—the highest since 2008—before settling at about $119 a barrel. Still, oil prices have nearly doubled since November and have increased five-fold since the depths of the pandemic.
While consumers may look at oil prices and cut their restaurant spending, the rising prices also threaten commodity costs, because gas is a necessary ingredient in the production and transport of a number of goods.
As it is, many commodities are up in the aftermath of the invasion, anyway. Wheat prices are up 64% since Feb. 16—Ukraine is a major wheat producer. Food prices were up nearly 13% year-over-year in January, meaning the spike in gas prices likely means that inflation isn’t going away anytime soon.
UPDATE: This story has been updated to reflect stock prices after market close.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.