'It's not fun:' Soaring gas prices are walloping Americans but hitting lower-income hardest
Lee Bryant, of St. Petersburg, Florida, was already struggling to meet expenses because he lost his job as a human resources manager for a department store chain during the pandemic and had to take a lower-paying supervisory position at a rival company.
Then, gasoline prices rocketed into the stratosphere.
Bryant, 55, decided to give up his side gigs at ride-sharing and package delivery services since they no longer netted enough income after deducting gas costs.
That left him with lower earnings and high fuel expenses, leading him to cancel his annual road trip to visit his 90-year-old mother in Indiana and friends in Boston, forgo a 44-mile drive to a yearly strawberry festival, and drop his cable TV service.
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“It’s not fun but it has to be done,” Bryant says. “I don’t see gas prices going down and I don’t see my salary going up.”
Skyrocketing gas prices are delivering another blow to Americans battered by high inflation, forcing them to pull back their spending and change everyday routines. Many are combining errands, dining out less and canceling day trips and vacations.
That will likely mean a bigger-than-expected hit to an economy that was already set to slow significantly after growing at the fastest pace in decades last year as COVID vaccinations increased and many businesses reopened or crept closer to normal.
Sky-high pump costs are imposing an especially big burden on low-income households who have been struggling to meet expenses.
“It’s a big hit to consumers, particularly low-income and moderate-income Americans,” says Mark Zandi, chief economist of Moody’s analytics. “They’re already suffering from very high inflation. This just adds to it.”
Gas costs make up about 3.6% of income for Americans earning less than $30,000 a year, compared to 2.3% for those earning $50,000 to $150,000, a Labor Department survey shows.
And if lower-income Americans have to pay more for gas, Zandi asks, “What else aren’t they going to buy?”
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Inflation reaches 40-year high
Annual inflation hit a new 40-year high of 7.9% in February, and gas prices accounted for nearly a third of the rise, the Labor Department said this week. The Russia-Ukraine war and related sanctions on Russia, or companies’ refusal to do business with the country, are curtailing its oil supplies.
On Thursday, the U.S. benchmark crude price, which hovered at $75 a barrel late last year, closed up about 1% at about $110 a barrel. Unleaded gasoline averaged $4.32 a gallon, up from just $3.73 a week ago and $2.81 a year ago, according to AAA.
Oil could peak at $125 to $150 a barrel while gas prices crest at $4.50 to $4.75, says Tom Kloza, chief global analyst for the Oil Price Information Service. He expects prices to drift down the second half of the year as additional oil from Saudi Arabia, the U.S. and other sources come online.
Still, oil averaging about $120 a barrel in 2022 would cost the average household around $120 a month in higher pump costs and shave economic growth this year by at least a half a percentage point to 3.25%, Zandi says. Since the U.S. is now a top oil producer, the toll on consumer spending – which makes up about 70% of the economy – is partly offset by gains to the energy industry, Zandi says.
Lydia Boussour of Oxford expects a bigger dent in growth of eight-tenths of a percentage point. She says U.S. oil production is limited by aging wells, supply chain snags, labor shortages and producers’ reluctance to ramp up output. That could trim growth to 3% – solid by historical standards but down from a 38-year high of 5.7% last year.
Bryant, the department store manager, used to earn about $16 an hour from his driver gigs after subtracting gas expenses, but that fell to $9 earlier this year as pump prices surged. And after accounting for depreciation and wear-and-tear on his 2022 Chevy Equinox, “I just don’t see the income any longer,” he says.
Bryant, who depleted his non-retirement account savings while he was unemployed during the health crisis, already was socked by a $230 hike in rent for his one-bedroom apartment.
By dropping his cable and landline phone service, Bryant says he’s saving about $120 a month.
“But with all of this,” he adds, “I do not mind paying the high gas prices if (they result) from the support of Ukraine.”
Walking to work instead of driving
Eliud Diaz, of Lancaster, Pennsylvania, no longer drives to work, opting to walk the mile or so to his operations job for an online learning company. He also has scrapped plans to drive to his brother’s wedding in Orlando, Florida, and take side trips with his family on the way back.
Instead, they’ll fly, and Diaz has decided not to buy a new outfit for the occasion.
“I’ll just wear whatever I have,” he says.
Diaz, 39, who used to eat out with his family four or five times a week, has completely cut out the ritual.
He says he now spends $64 to fill up his Hyundai Elantra, about double his cost weeks ago.
“Many things have changed,” he says.
Bigger impact for lower-income people
Lofty gas prices mean more dramatic changes for lower-income Americans.
Gladys Stanley, of Newark, Delaware, was already falling behind on her rent, car loan payment, electricity and other bills. She works as a caregiver in a group home and recently got a raise to $18 an hour but could no longer put in overtime after holiday-related staffing absences petered out a couple of months ago.
Then pump prices shot higher, raising the cost to fill up her SUV to $90 from $50 and putting her further behind on her bills. Strong, who came to the U.S. from West Africa in 2017, has a 20-minute drive to work.
“Sometimes I don’t have enough money for food and gas,” says Stanley, a single mother with three children, including two who still live at home.
When her son asks for treats in the grocery store, she says, “I don’t have the money to buy.”
Stanley says she’s looking for a second job in her field but already has little time to spend with her son.
“It’s a lot of stress,” she says.
Others are making simpler adjustments.
“The magic number was four bucks a gallon,” says Jay Boucher, a child care consultant who lives in Arlington, Virginia. “Up to that I didn’t think I had a problem, but now psychologically 4 is way closer to 5.”
Boucher, 49, used to run errands daily – grocery shopping, car wash, picking up his kids from art class and taking them to the playground. Now, he has shifted most tasks to one weekend day to limit his gas usage. He also has started shopping at a discount grocery store that mostly sells private-label products.
'Here we are again'
Stacy DiBenedetto, of Roanoke, Virginia, recently started car-pooling with other mothers to pick up their kids from soccer practice and ordering clothing, home goods and other products online to minimize driving.
“The irony is now that COVID is dying out, we should be able to go to more places, but here we are again,” says DiBenedetto, 44.
Miranda Saunders, of Richmond, Virginia, is scrambling to book three airline flights over the next year – for Thanksgiving, Christmas and her kids’ spring break – before rising jet fuel prices drive air fares higher.
“We… are very aware the situation will get worse before it gets better,” she says.
Even the whimsical is falling victim to the run-up in gas prices. On weekends, when they had nothing to do, LeLynda Briggs of Omaha, Nebraska, and her family would drive around town and listen to music on the radio.
“That is definitely not happening now,” Briggs, 36, says.