MW Everyone's paying more for gas, but only some are cutting back. Here's why.
Andrew Keshner
The K-shaped economy shows up at the gas station
It's been a tale of two drivers at the gas pump.
When gas prices surged in March, lower-income drivers tried to cut back, but they still felt the sticker shock. On the other hand, rich drivers barely flinched.
All drivers had to spend more money on gas in March, but drivers making less than $40,000 cut back the most on their gas purchases and saw the smallest increase in spending. Drivers making more than $125,000 cut back the least on buying gas, and had the largest spending increases, according to research released Wednesday from economists at the Federal Reserve Bank of New York.
Before the start of U.S. and Israel's strikes on Iran caused a shock to the world's oil supply, diverging spending behaviors for low- and high-income households were emerging in America's "K-shaped economy."
That pattern, of wealthier people continuing to spend while their lower-income counterparts pulled back, showed up quickly at the gas pump in March, as gas prices jumped roughly $1 per gallon, the New York Fed researchers found.
Wealthier households' purchase amounts, when adjusted for inflation, were essentially unchanged during March. Their real gas consumption was 1% lower compared to a 7% decline for low-income drivers.
The analysis fits with other data showing how driving habits are responding differently to gas-price hikes. But the New York Fed data has a twist.
High-priced gas seems to be making even less of a dent on upper-income households' budgets compared to the last time gas prices surged to record highs.
In June 2022, the national average gas price broke an all-time record, hitting $5.01, according to AAA. Energy markets then were absorbing the price shock from Russia's invasion of Ukraine.
Like now, nominal spending grew the most for high-income drivers and the least for low-income drivers in the January-July 2022 timeframe, according to New York Fed researchers.
But the divide was much less pronounced compared to now.
In June 2022, high-income drivers' real consumption of gas was 11% underneath a 2020 baseline. In March, their consumption was less than 1% under the same 2020 starting point.
The research doesn't say why high-income drivers are cutting back less than they did last time. There are clues elsewhere. New York Fed data shows the net worths of higher-income households have grown sharply since 2023, while net worths of lower-income households have increased more modestly.
The K-shaped pattern at the pumps could continue and possibly deepen. Prices have only continued to rise in April and May, even with a cease-fire and now a standoff on how to end the conflict.
Drivers paid an average of $4.53 for a gallon of gas on Wednesday. Even with while the stock market hopes for a peace deal, the pump price is up from $4.11 a month ago, according to AAA.
A peace deal wouldn't guarantee immediate gas-price relief, experts say. Memorial Day weekend marks the unofficial start of the summer travel season, which might mean differing plans for who's hitting the road.
-Andrew Keshner
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(END) Dow Jones Newswires
May 06, 2026 18:11 ET (22:11 GMT)
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