Rising Gas Prices Hit Americans Again But This Time It’s Different

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessRising Gas Prices Hit Americans Again But This Time It's DifferentWhen fuel costs jumped earlier in the Iran war, US consumers powered through it — with a hefty assist from federal tax refunds. Now they’re getting hit by another wave of higher gasoline prices, and the buffer is gone.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.152rm3ugqcqfu{nq}yc]58}n_media_dl_1.png Pantheon Macroeconomics(Bloomberg) — When fuel costs jumped earlier in the Iran war, US consumers powered through it — with a hefty assist from federal tax refunds. Now they’re getting hit by another wave of higher gasoline prices, and the buffer is gone.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThat’s a risk to US economic growth, which just got a bigger-than-expected boost from consumer spending last quarter. It’s also bad news for President Donald Trump and fellow Republicans with the November midterm elections fast approaching.Average pump prices rose more than 50% in the months after the US and Israel attacked Iran, peaking at $4.56 a gallon in May, according to the American Automobile Association. Around that time, Americans had been getting tax refunds that were fattened up by Trump’s One Big Beautiful Bill Act. The average check this year rose 11.5% to $3,276, Internal Revenue Service data show.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againMany economists pointed out how those payments helped cushion the energy shock. But now gasoline prices are back above $4 a gallon amid a resumption of hostilities after a June truce broke down.Consumers are already burdened by the cost of groceries and other staples. With tax refunds largely paid out, they’ll have to dip into savings this time or find other ways to meet the bigger fuel bills, according to Tim Quinlan, senior economist at Wells Fargo & Co.“I’m never confident enough to bet against the consumer,” Quinlan said. “But with every week and month this conflict drags on, we go from a perfect offset to something that’s having to come from somewhere else.”This week’s numbers for second-quarter gross domestic product showed how Americans kept shopping despite inflation that hit a three-year high in May. Inflation-adjusted consumer spending, which comprises about two-thirds of economic activity, rose at a stronger-than-expected 3.2% rate.The public took the approach that the energy price spike was likely to be short-lived, and maintained their spending patterns, Stephen Stanley, chief US economist at Santander US Capital Markets LLC, said in a note.But the US saving rate fell in June to the lowest since 2022. Since then, the Iran conflict has flared up and caused oil markets to turn more volatile again. A key gauge of consumer sentiment improved somewhat in July despite the pickup in gasoline prices, though it still remains historically depressed. Crude prices determine more than half the cost at the pump, but gasoline also trades on its own market, and abnormally low supplies have helped push up the price. That owes in part to US refineries focusing on products that face even higher demand globally — and command higher prices — like diesel and jet fuel.If nationwide gas remains above $4 a gallon by Aug. 10, it will be the latest into the summer – America’s peak driving season – that it’s been at that level, according to more than two decades of AAA data. That burden comes on top of price hikes driven by Trump’s tariffs and the AI boom, and the lingering impact of pandemic-era inflation.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.“The momentum we’ve seen in consumer spending, it’s very hard to see that being sustained,” said Oliver Allen, senior US economist at Pantheon Macroeconomics. “At some point, something’s gotta give.”Lower-income Americans are under the most pressure to tighten their belts, and they’re also the ones who got less help from IRS checks. Raj Mustapha, a 42 year-old driver for a grocery chain in Columbus, Ohio, said he didn’t get a big refund this year. He’s cutting back on spending, with gasoline prices in Ohio around $4 a gallon on average and a weekly grocery bill of $200 for his family.Mustapha said he wants to be optimistic the war in the Middle East will end soon, but he expects gasoline prices will remain high as long as it continues. “Hopefully things will change, but for now, it’s not easy,” he said.One place gasoline prices are almost certain to have an impact is at the ballot box, where November’s midterm elections will determine control of Congress.The cost of gasoline is an important predictor of presidential approval, as well as sentiment about the economy, because consumers are hyper-aware of price movements, said Laurel Harbridge-Yong, a political science professor at Northwestern University who’s studied the topic.Many voters will blame Trump because he started the war that drove up energy costs, Harbridge-Yong said. And Republicans will suffer in the midterms if gasoline prices remain elevated because the party in power typically loses seats, and how many often depends on the direction of the economy and what presidential approval looks like, she said.White House spokesman Kush Desai emphasized the Trump administration remains focused on implementing the president’s agenda for long-term US prosperity and that “oil prices – along with overall inflation – will plummet again when President Trump forces a successful resolution with Iran.”Speaking at a rally in Georgia last week, Trump offered a similar prediction.“It’s going to come down maybe lower than when we even started,” Trump said of oil prices. “Just give me a little time.”A Quinnipiac University poll released Wednesday put Trump’s approval rating at 32%, a record low in its surveys, and found that 73% of voters blame the president for the rise in gasoline prices. “As far as who takes the fall for the price at the pump, the buck has stopped at the president’s desk from the very beginning of the Iran war, and continues to do so,” said Quinnipiac polling analyst Tim Malloy.—With assistance from Caitlin Reilly, Will Kubzansky, Jordan Fabian and Jeffrey Sparshott.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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