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This Is How Much U.S. Households Lose As Gas Prices Rise

refinery

U.S. gasoline prices are at a four-year-high this year as a result of the higher price of oil which has reached a three-and-a-half-year high in recent weeks.

The increased pump prices are now eating into the disposable income of the average American household that will have a total of $440 less to spend this year on other goods and services because this money is expected to go for buying higher-priced gasoline.

The higher spending on gas could offset one-third of the gains from the tax cuts, with low- and middle-income families feeling the pinch much more than higher-income earners, according to S&P Global economists Beth Bovino and Satyam Panday.

“This would be tantamount to a tax increase for American households,” the economists wrote in a recent report, quoted by Bloomberg. “This is especially true for middle- to low-income Americans.”

The higher-income families, on the other hand, will be less affected by the increase in pump prices because spending on gasoline accounts for a smaller share of their total disposable income.

“The income tax cut is virtually compensating those who were hurt least from the oil-price change, which may result in even larger inequality,” according to Bovino and Panday.

Despite the higher spending on gasoline, however, the overall U.S. economy is now less oil-dependent than in the past, so oil prices in the $70s will have a more mitigated impact on economic growth than it would have in previous years, the S&P Global economists and Fed economists say. Related: Libya Stops Pumping Oil

For this year’s April–September driving season, the EIA expects U.S. regular gasoline retail prices to average $2.87/gallon (gal), up from an average of $2.41/gal last summer, mostly due to expectations of higher crude oil prices. According to the Short-Term Energy Outlook (STEO) from June, monthly average gasoline prices may have peaked in June at $2.92/gal and are expected to drop gradually to $2.84/gal in September.

For this year’s July 4 holiday, U.S. drivers will be paying the highest Independence Day average gas prices since 2014—at $2.90/gal, compared to $3.66/gal for July 4 in 2014, when oil prices were $100 a barrel, according to GasBuddy.

Although current national average gas prices are below the May peak of $2.98/gal, a price jump may be looming, due to OPEC’s announcement of a smaller-than-expected oil production increase, the U.S. push to have Iran oil exports down to “zero”, and significant U.S. crude oil stockpiles draws, GasBuddy says.

According to AAA, last week the United States saw the largest one-week reduction—9.9 million barrels—in crude inventories for the first summer driving season in five years. “If the decline in inventories continues and oil prices remain high, motorists could see a spike in gas prices later this summer despite the anticipated increase in production from OPEC and its partners,” AAA said last week.

Still, the higher oil prices now have a more muted impact on the U.S. economy than before, Dallas Fed President Robert S. Kaplan wrote in an essay last month. Related: Sanctions On Iran May Send Oil Prices Above $90 Next Year

Several factors have mitigated that impact over time. One is U.S. shale production—higher domestic oil production means that a larger share of the economy is helped by higher oil prices. Then, reduced crude oil imports benefit the U.S. trade balance. Finally, the U.S. economy is less oil-intensive now than in the past, because of higher fuel efficiency, other forms of energy substituting part of the oil dependence, and higher share of less-energy-intensive services sector as a share of the overall economy, Kaplan argues.

For example, in 1970, the U.S. consumed 1.1 barrels of oil for every $1,000 of gross domestic product (GDP). By 2017, only 0.4 barrels of oil were consumed for every $1,000 of GDP, the Dallas Fed president says.

“Based on these various factors, it is the view of Dallas Fed economists that the negative impact of higher oil prices on GDP growth is likely to be more muted than in the past. It is our view that a 10 percent increase in the oil price should have a relatively modest negative impact on U.S. GDP growth. This negative impact should further diminish as the U.S. continues to grow its domestic oil production,” Kaplan writes.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh G Salameh on July 02 2018 said:
    Since the discovery of oil in Pennsylvania in 1865, the American people have always considered the availability of cheap oil for their use as their birth right. And while high oil prices have nowadays far less impact on US economic growth than it would have in previous years, this did not stop American consumers from grumbling about having to spend more on gas.

    To the low- and middle-income families, the higher spending on gas could offset
    one-third of the gains from the tax cuts. This partly explains President Trump’s request to Saudi Arabia and OPEC to increase production to prevent oil prices from rising steeply otherwise they would undo the economic boost from his tax cuts ahead of the midterm elections in November this year and could lead to losses by his Republican party. The other reason is the impact on the US balance of payments from a rising oil-import bill of 7-8 million barrels a day (mbd).

    Still, higher oil prices benefit the US economy hugely because of the following factors. One is that the US oil industry which employs 2% of the American work force has become very important to the US economy in terms of its earnings from the exports of crude oil and as well as LNG. Second, the US economy has become far less oil-dependent than in the past thus reducing the adverse impact of high oil prices.

    And while higher oil prices may deprive American consumers of a bit of their disposable income, their overall economy benefits quite a lot.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Bambi Hussein on July 03 2018 said:
    Love it! My royalty checks are increasing.
  • Paul Dove on July 03 2018 said:
    Any reason possible to raise oil prices...no matter what it is...this is how oil companies make their money. The smallest reason has billions of dollars worth of effect.
  • Along It on July 03 2018 said:
    Funny how no one cared about this when it was over 4 bucks a gallon under the obama-kneegrow.
  • jRamsey on July 03 2018 said:
    I'm sure the coal industry will get us back on track....LOL.
  • cleo48 on July 03 2018 said:
    I don't know where all this anxiety and vapors are going on, but regular is still at 2.79 in my state. I think this is orchestration. Either that or some states are just taxing the snot out of their citizens.
  • Joe on July 03 2018 said:
    Every non smoker cheered and voted to raise taxes on cigarette smokers. So we stopped smoking.
    Now the gas prices are up due to Obama's 8 yrs and we don't care. We're retired and drive for our entertainment only.
    Gas prices can teach $10.00 per gallon and we still would vote to tax gas even higher.
    Paybacks are an *itch.
  • howie on July 03 2018 said:
    there is lots of inflation! why shouldn't oil be part of it?
  • Russell41 on July 03 2018 said:
    Complain, complain, complain. A lot of people are making money when oil demand is up. This is obviously a liberal attempt by the Dems who are never happy about anything. Get over yourself!
  • Dan haahaa on July 03 2018 said:
    Funny that all the blame goes to foreign countries and nothing is being said that when the prices dropped most of the state level swamps raised the "gas tax rate". I havent researched any other states but i know former NH gov now NH senator Maggie Hassan raised it by 9 cents a gallon and justified it by saying "were still 5 cents below the national average".
  • The (Deplorable) MUSEman on July 03 2018 said:
    Gee.. I miss the days when the well-deserved sanctions against Iran, Venezuela's greedy Socialist dictator, and Russia's need for cash caused them all to flood the market with oil, thus keeping the price low.

    Well, at least Obama got his backdoor Foreign Policy deal with Iran to bolster his legacy, Hillary Clinton got her $150 million from her Uranium One deal with Russia, and Hugo Chavez' family is now $4 Billion richer off the backs of their citizens...and we're all stuck with higher priced oil. So I guess that's something /snark
  • nuthinuffin on July 03 2018 said:
    let the market determine the price...trump is not responsible for the price of oil.

    Under President Obama, the record gas price was reached the week of May 9, 2011 when gasoline averaged $3.965 per gallon. never a mention...that's over thirty five percent higher than today's average of $2.86.
  • Mike on July 03 2018 said:
    Still cheaper than under Obama.
  • Miss V on July 03 2018 said:
    There is an easier way to deal with the gas prices. Simple, I am investing in a bike, parking the car, dropping the insurance, and registering it as non operable. It is cheaper to use Uber or public transportation in Los Angeles. Will save me over $1200 per year.
  • Evelyn Johnson on July 03 2018 said:
    Excise and state taxes on gasoline are a huge portion of the per gallon price.
  • BRENT MOORE on July 03 2018 said:
    The economy is booming. More people are working and driving to work. More paychecks are being banked and more products are being purchased and shipped by semi. This means demand in gasoline is going up, which strains supply. Then you have OPEC playing their games with production, so President Trump is going around them by getting the Saudis to increase their production. The higher gas prices you see are because we now have a healthy and growing economy. You can grumble about it, but that's just the way she goes, Bubs.
  • Rich on July 03 2018 said:
    The Midwest is seeing a drop to levels of a few months ago.
  • Ridiculous Liberals on July 03 2018 said:
    Such nonsense. During the majority of the Obama Presidency the price of Oil was over $100 bbl. Now that Trump is Potus people freak over $75 bbl oil? Get real people this certainly isn’t some crisis. Most oil cos can’t survive at $60 bbl so $75 isn’t unreasonable considering it’s less than $2 gallon of crude oil while a gallon of milk is $4 gallon(and easier to access) or a Starbucks coffee by the gallon is more like $35-$40
  • Roy Batty on July 03 2018 said:
    Gas prices peaked under Obama in 2011 due to the Arab Spring, but after that have been steadily falling.

    No surprise that when an incompetent like Trump gets in office the uncertainty will drive prices back up.

    Don't believe me? Just check the FACTS:

    https://www.titlemax.com/discovery-center/planes-trains-and-automobiles/average-gas-prices-through-history/
  • henry on July 03 2018 said:
    funny no one mentioned inflation when oil was over 80 dollars doring obama.but now it's try to cause panic for the midterm
  • m on July 03 2018 said:
    i hope it gets higher so they will drill a Utica Shale oil well on me i will show them how to make jobs
  • Sheila on July 03 2018 said:
    Fix this- open the reserves and whatever happened to making our country energy independent?
  • Irate Nate on July 03 2018 said:
    Can someone explain to me why people expect gasoline to remain at the same price forever? I remember paying 27 cents a gallon. I suppose we've forgotten that driving a car is a privilege, and owning a car is a tremendous financial responsibility. We won't even talk about insurance.
  • JDave on July 03 2018 said:
    I don't see what's the big deal here...At least oil isn't over $100...This is a lot of nothing...
  • wizbang on July 03 2018 said:
    Remember when gas was over $4@gallon under Obama? Remember when he said cheap energy was a thing of the past? Once again the MSM displays it's arrogance and relies on the extremely short memory of liberals.
  • Jim Winchester on July 03 2018 said:
    Get a grip, $2.34 in my state. State and federal government make more on a gallon than Big Oil.
  • YouGuysareFunny on July 03 2018 said:
    Crazy how you people keep deflecting back to Obama.

    "never mentioned" "never had a problem".

    Google is your friend. You should go back and read the thousands of stories you missed about gas prices during Obama.
  • Mrs Libnish on July 03 2018 said:
    I specifically remember it being over $4 three or four summers ago. The "media" didn't care to report on how it affected me back then. Why the concern now????? Idiots.
  • Bill Jefferson on July 03 2018 said:
    Has everybody forgotten how happy they were when oil prices came DOWN to $70 from over $120?

    This too shall pass. MAGA
  • Old Biker on July 03 2018 said:
    No one is talking about the round of state fuel tax increases that have taken place in the past couple of years. The wholesale price of gas before taxes is still well below 2014. If you are paying more than in December 2014, then look to your state legislature, not the feds.

    That being said, a federal tax increase was floated around a few months ago and Trump was quoted as favoring it to rebuild infrastructure. If 100% of the road taxes being collected were being spent on the roads, and it's not enough to get the job done, then perhaps we should look at the federal tax. However, I have a feeling that's not the case in most states. Here in California, our "leaders" spend perhaps only 50% of the collected road tax actually goes to the roads. The rest of the funds are robbed to pay for social programs and to bail out Calpers, the state public employees pension plan that has nearly $1 Trillion in unfunded liabilities.
  • Big on July 03 2018 said:
    Big friggin deal..a little over a dollar a day...A DAY..just trying to make Our President look bad... was waay worse when Obama was bumbling around
  • Jay Clark on July 03 2018 said:
    Roy Batty,
    You're a bit batty.
    Higher prices induced capital investment, while Obama's stated goal was for energy prices to be as high as possible so people would use less and possibly pay more to invest in renewable systems that are not yet efficient & therefore have a very long return on investment.
    America is much closer to being energy independent because of capitalism and hydraulic fracturing and that dynamic will only intensify as prices ease up.
    The general American public benefits more than it suffers
  • DJ Webb Sr on July 03 2018 said:
    It is all about competition.
    Right now a lot of Americans own gas-guzzling automobiles and trucks.
    The average person owns a used car because the prices went out of sight.
    In the next three years the greed in the oil industry will destroy most of the industry itself.
    The future belongs to those who can make transportation reasonably cheap.
    A 3-4 year old electric car devalues up to 50 or more percent in 3 years.
    When they release the new storage on these electrics, bring the miles up to 150-220, and make the batteries last a lot longer(see glass battery technology) then the oil industry is done.
    A Prius is still acceptable with very high gas mileage of 45-55 miles per gallon of gasoline.
    This is not the 70s and they do not have a monopoly on alternate transportation.
    The only reason they still exist is people dislike change. So they buy gasoline driven vehicles.
    Even now alternate oil wells are in South America and the Faukland Islands.
    It is only a matter of time before the middle east becomes uncompetitive with other oil producing countries including Russia.
    Our trucks are often driven by natural gas.
    Beware of setting prices too high. The market will destroy you.
  • Amos on July 03 2018 said:
    If you are a Democrat, Progressive, Leftist, this news should make you very happy. After all, if people are quitting driving because of the high gas prices, there is less pollution in the environment. This is what you wanted! This is your message!
  • Jerrell Strawn on July 03 2018 said:
    Gas $2.41 here.
  • Rod on July 03 2018 said:
    Per The Fed Reserve U.S. Inflation Calculation only has two items The Fed uses. Gas and House's, that's it. If you ask me it's a Joke.

    Also the Price of Gas is hurting people because of:
    1. Ethanol is an inferior Alcohol which turns to Water, it reduces Mileage by over .29% per Gallon.
    2. You have to spend more.

    Not all States have Bad Gas. Check your States Laws on Motor Fuels for this Clause, "Octane shall be no less then 82". That means the Fuel distributors only have to put that amount of Octane in the Fuel. Octane is expensive so 82 Octane is just enough to keep your engine from Blowing Up. Engineers figured this formula out Decades ago.

    States like Tennessee, Georgia and Florida do this for the Distributors. It money in their Tax Revenue Pocket and they love taking it from you.

    I was out West on a Harley Vacation. At home I get 39.5 MPG running 70 MPH but out West I got 57MPG running at 75 MPH. I freaked out over the way the bike performed and the Gas Mileage. I found out when you pull up to a Pump and it's labeled 91, 92 or 93 it's real Gas....

    If you don't like what's going on, Write Trump a Letter.
  • Boris Badenov on July 03 2018 said:
    Want lower fuel prices, drop the taxes that AREN'T being used to fix the roads and bridges.
  • William Place on July 03 2018 said:
    It is all about speculation and hedge funds! Stop the PAPER oil and gasoline and DOWN goes the price.
  • Douglas Scott on July 03 2018 said:
    I paid 4 to 6.50 a gallon for 8 damn years under Obama. Since I have been paying 2.86 to 3.09 depending on the state. Rising gas prices? My butt. I cover 3 western state every week. I'm paying .05 cents a gallon more right now than I was 2 years ago and that is only because of the seasonal summer increase at Memorial day. If you are seeing extreme hikes, maybe you better visit with your dem govs in your state regarding their taxation. Stop the scare tactics and the fabricated reporting. At this point this just ain't a reality except in fantastical little minds.
  • eingriff on July 03 2018 said:
    S, whose ox is being gored today?
  • j wi on July 03 2018 said:
    The price of wind power is less than natural gas which is less than coal. Time for these guys to stop whaling?
  • Mensa Graham on July 03 2018 said:
    Gasoline is $2.68 a gallon here. It seems some states are taxing the hell out of you guys who are screaming. Either that or you are screaming because someone told you to. Either way hopefully that makes you feel real proud of yourselves. If it does bother you that much how about doing what most people do? Cut back some.
  • gUY aUGSBURG on July 03 2018 said:
    Regular just dropped by 30 cents per gallon here in the tourist destination of Sedona Arizona. WTF are you talking about? FAKE NEWS!
  • Nickolas J Peros on July 03 2018 said:
    Drill baby drill.
  • barron58 on July 03 2018 said:
    My tax rate went from 28% to 24%, gas prices don't effect me.
  • brian on July 03 2018 said:
    Thanks to Governor 'Moonbeam' Brown and the dems, those of us in CA pay $.47 per gallon in taxes. I don't want to hear anyone complain who voted for the leftists, you get what you vote for and rob the rest of us.
  • Bubba on July 03 2018 said:
    Speculation Inventories are higher now then last summer .Open the SR reserves there not needed anymore 700 million barrels on the market will crush the speculators.
  • Fredrick S Arnold on July 03 2018 said:
    odd how the lefty "media" 4got gas was over $4/gallon when Bathouse Barry Soetero from Chicogo was pres...................
  • Chris Mccandless on July 03 2018 said:
    If we wouldn't export oil, the price of gas wouldn't be high.
  • William Geoghegan on July 04 2018 said:
    actually came on here to ask exactly how this is an issue. prices fluctuate all the time. why has this been front page for two days on drudge?
  • David Rivera on July 04 2018 said:
    this was normal price on oil for the last 20 years .. oh please... it not over 4 dollars.. it is not hurting. just another way to try and pick on trump and they have nothing. and the Prices going up are not his fault. He has not touched the oil reserves so this price in not even moot.
  • Drustino on July 04 2018 said:
    3.05 in Penna this morning. If trump wants to win pa again, he better do something, and fast, period!!!
  • Aghast on July 05 2018 said:
    Oil prices going way up.
    Interest rates going way up.
    Business activity going way up.

    Middle class finally growing again for America's natural resources which the citizens own, are being made available to the world.

    Monetizing natural resources to foreign sources allows Americans to redirect for savings, consumption and investment. Look out!
  • the masked avenger on July 06 2018 said:
    Mamdouh dribbles on. The article is wrong again. Oil rises, prices rise.....on everything. The average house hold loses way more than 440 a year. High oil destroys economy's. The only people who profit on high oil is oil,gas stations and distributors. High oil drive innovations to replace oil. That is the only good thing about high oil.

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