This is fine, but it feels terrible
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Aïda Amer/Axios. Stock: Getty Images
The energy crisis in the U.S. is starting to eat into American wallets, and though it's hardly an apocalyptic scenario, it sure feels awful.
Why it matters: Unlike in Asia and Europe, the U.S. is relatively insulated from the threat of actual gasoline or oil shortages, and price increases are so far manageable.
The intrigue: That's good for the economy and for stock prices, and cold comfort to basically everyone else who is forced to pay more to fill up the tank.
By the numbers: The increase in gas prices has been kind of Hobbesian: nasty, brutal and taking place over a very short period.
- Since Feb. 27, the day before the war, the average price of a gallon of unleaded gas has risen 47%, to $4.39. (It went up 9 cents just Thursday night!)
- That's lower than what it was during the 2022 period, and if you adjust for inflation, it's even lower still.
- And gas makes up a small share of Americans' overall spending.
The big picture: Even if a lot of people can absorb the increase, the whiplash of the record-breaking rise in gas prices is making people feel bad — we're seeing low consumer sentiment.
- It's the latest chapter in the current vibecession, where the economy holds up, but no one feels particularly great about it.
How it works: Higher gas prices can force people to make choices that they don't want to make — trading down on spending for groceries or restaurants or clothing, says David Tinsley, senior economist at the Bank of America Institute.
- For the economy overall, those shifts may not be noticeable, as people keep spending levels the same.
- But for individuals, it stinks.
- Tinsley, who is British, puts it this way: "They don't necessarily want to make those choices. So they can be quite cheesed off."
Zoom in: Spiking gas prices are already eating into Americans' paychecks.
- In March, the median lower-income household spent 4.2% of its income on gasoline, up from 3.9% a year earlier and above 2019 levels, according to Bank of America internal customer deposit data.
- While that's below the levels of inflation seen in 2022, gas prices are still climbing.
Middle-income earners are doing better, but there are signs of stress.
- For a middle-wage earner, an hour of work would pay for about 7 gallons of gas in March, per calculations that economist Jared Bernstein did for Axios.
- Before the war, you would get 10 gallons for your efforts.
Yes, but: For now, some folks can cushion the blow by tapping their tax refunds or using credit cards.
- But there are signs of growing credit stress, as well. TransUnion reported Thursday that higher inflation is weighing on Americans with poor credit scores.
- "They're struggling more," says Michele Raneri, vice president and head of U.S. research at TransUnion.
- Folks don't have much cushion to fall back on if they have a difficult month.
Friction point: In 2022, consumers were able to absorb sky-high gas prices because their paychecks were going up. Now, things look worse.
- In March, wages and salaries grew at just 1% for low-income households, per BofA data. That's compared with 5.6% at the high end.
What to watch: Driving levels in March and April are trending slightly lower than last year, according to data tracked by JPMorgan Chase.
- "We are already seeing higher pump prices begin to curb discretionary driving in the U.S.," Natasha Kaneva, head of global commodities strategy at the bank, tells Axios.
The bottom line: High gas prices are manageable, but they still hurt.
Editor's note: This story has been updated with the latest gas prices.
