By Megan Leonhardt
Consumers are cutting back on how much they're spending to fill up their gas tanks these days, but most household budgets are still getting walloped by higher prices.
Household spending on gasoline rose more than 15% in March, even as households across the board pulled back on inflation-adjusted consumption by 3%, according to the latest analysis released Wednesday by the Federal Reserve Bank of New York. The impact of higher gas prices fell hardest on lower-income Americans, threatening to further exacerbate inequities among income groups.
Americans have largely shouldered higher gasoline prices without reducing their overall spending in recent months by drawing on savings and using higher average tax refunds as a cushion. But those are likely temporary solutions. Double-digit increases on gas spending over the course of a month doesn't seem sustainable without Americans making cuts elsewhere in the budget. That doesn't bode well for discretionary spending in the coming months if gas prices remain elevated.
National average gasoline prices have risen from under $3 a gallon in late February to over $4 a gallon during April. This week, average prices at the pump ticked above $4.50 a gallon, the highest price levels recorded so far this year, according to AAA.
Futures prices also now suggest gas could remain around $4 a gallon though the summer months -- signaling that there will be no meaningful relief for consumers in the near-term.
The ongoing oil shock has hit lower-income households hard. Those earning less than $40,000 a year spent 12% more on gas in March. That spending jump would've likely been even higher if this cohort hadn't also significantly cut back on their real gas consumption by 7% -- the biggest pullback across income groups, the NY Fed reported.
Researchers suggest that this cohort may have increased carpooling or used public transit where available to cut back on their spending at gas stations.
Middle-income households with incomes between $40,000 and $125,000, meanwhile, spent nearly 15% more at gas stations in March. But they only cut their usage by 4.8% from February to March.
Higher-income households barely reduced gas consumption, only by about a percent, in March. That, unsurprisingly, led households earning over $125,000 to spend almost 19% more on gasoline in March.
Wealthier families may not have felt the need to dramatically pull back on their gas consumption, however, because wage gains among this cohort are holding up.
The Bank of America Institute found that higher-income households saw wage growth of 5.6% in March from a year ago, compared with just 1% and 2% monthly gains among lower-and middle-income groups, respectively. That was the widest gap in growth rates since 2015, according to data from the Institute.
That trend continued in April. The Institute reports that higher-income households' after-tax wage growth rose to 6% from a year ago, dramatically higher than the 1.5% gain among lower-income households, for example.
The Institute tracks Bank of America customer deposit account data to determine monthly employment and wage gains based on regular, recurring deposits, which would include paychecks and bonuses, but not gains from stocks or any other kind of realized capital gains.
The wage gains across incomes, even among higher-income households, do not offset the increased levels of spending on gasoline. Economists expect Americans to start responding to the pinch from higher oil prices by pulling back on spending, especially discretionary purchases, over the next month or so.
The latest spending and consumption trends are similar to how households responded to the oil shock that occurred between January and July 2022 after the onset of the Russia-Ukraine war, N.Y. Fed researchers noted on Wednesday. But while Americans' reactions to both of the recent oil shocks are "directionally similar," N.Y. Fed researchers found that the magnitudes of the gaps between households were noticeably larger during the latest gasoline price spike.
After energy prices started to decline in late 2022, N.Y. Fed researchers found that spending rebounded to pre-shock levels. That signals that once the effects of the current Middle East conflict ease, prices and spending patterns should also return to levels seen at the start of the year.
Write to Megan Leonhardt at megan.leonhardt@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 06, 2026 13:54 ET (17:54 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments