The New York Fed finds that rising gas prices are hitting low-income households the hardest
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A new report by The Federal Reserve The Bank of New York finds that recent increases in gas prices have affected households very differently based on income level.
Oil prices hit a four-year high in March amid the Iran war, prompting the closure of the Strait of Hormuz, where about 20 percent of the world’s oil passes through tankers.
The New York Fed analysis found that high-income households significantly increased their consumption of gasoline and kept their actual consumption at a level that was unchanged from pre-war spending patterns.
In contrast, low-income households reduced their actual consumption of fuel but also saw a sharp increase in their consumption due to the large increase. electricity priceswhich contributes to the so-called K-shaped pattern in fuel consumption.
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Low-income households have cut back on their fuel consumption the most among high-income groups, the New York Fed found. (Jack Taylor/Reuters)
Fuel consumption patterns correlate well with when it is played energy prices arose after the Russian invasion of Ukraine in 2022.
The New York Fed report used data from analytics firm Numerator that showed average gasoline consumption rose more than 15% in March, rising from 10% below its 2023 level to 5.5% above that mark.
That increase was driven by higher gasoline prices, as actual gasoline consumption fell 3%, while the Advance Monthly Retail Trade Survey found spending at gas stations rose 14.5% in March.
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Consumers across all income groups declined, although spending by high-income households changed little. (Angus Mordant/Bloomberg)
Electricity prices also had an impact a K-shaped pattern among income groups, as low-income households increased their spending by at least 12%.
Despite all that, low income families reduce their real gas consumption significantly, buying 7% less gas, with higher prices contributing to the overall increase.
Among the highest income households, their nominal gas consumption increased by 19%, which was the most among the highest income groups, mainly because they reduced their actual gas consumption by at least 1%.
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Shipping through the Strait of Hormuz has been halted during the Iran war. (Giuseppe Cacace/AFP via Getty Images)
Middle-income households had a moderate increase in spending and a decrease in actual consumption at gas stations, indicating that a K-shaped consumption pattern for both nominal and actual fuel consumption existed in March 2026.
New York Fed economists described the K-shaped pattern as “wider than ever” compared to the 2022 shock caused by Russia’s invasion of Ukraine.
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“High-income households have modestly reduced real gas consumption and increased gasoline consumption significantly compared to 2023,” they explained. “In contrast, low-income households increased consumption by much less and reduced real consumption by much more, either by car pooling or by substituting public transport where it is available.”
