Higher gas prices may be starting to eat into Americans’ substantially higher tax refunds this year. And with the tax benefit in the rearview mirror, Americans still have to contend with higher pump prices for the foreseeable future.
The total amount refunded to US taxpayers by tax day increased by $43 billion from last year. However, some of that windfall may be going toward higher gas prices, as elevated prices at the pump have already cost Americans $19 billion, according to Bank of America.
“Rising energy costs due to the Iran war have likely blunted the long-anticipated boost to consumer spending from fiscal stimulus,” Bank of America analysts wrote in a note.
Read more: When will gas prices go back down? When drivers could finally see relief.
Due to the conflict between the US and Iran, the Strait of Hormuz, a critical waterway for one-fifth of the world’s oil supply, remains closed. As long as traffic through the strait is at a standstill, global supply will be constrained, sending crude oil prices surging and driving up gasoline prices.
Earlier this week, futures on Brent crude (BZ=F) surged to above $120 per barrel, the highest price since June 2022, while US benchmark WTI crude (CL=F) jumped to $110. Industry analysts estimate that every $10 increase in crude oil prices translates to a roughly $0.25 increase per gallon at the pump.
The national average price per gallon also hit its highest level since 2022 this week, reaching $4.39 per gallon on Friday, up from $4.06 a month ago and the $2.98 per gallon price point before the war began.
Spending has held up so far, as exhibited by the 1.7% increase in March retail sales and quarterly sales figures from companies like Starbucks (SBUX). But other affordable consumer brands like Domino’s (DPZ) and Wayfair (W) had trouble winning over consumers who may be feeling iffy about their budgets.
Read more: Would a gas tax holiday lower prices? What drivers should know.
Bank of America warned that unless there’s relief at the pump soon, “the ‘gas tax’ should start to weigh increasingly on the consumer in coming months.”
With fuel prices in California rising above $6 per gallon on average for the first time since October 2023, it’s a hefty price to swallow.
Experts warn relief won’t come anytime soon either, even if the strait does reopen. “Pre-war prices could take ~60 weeks or so because of the massive amount of oil lost to the closure,” GasBuddy analyst Patrick De Haan said on X.
When gas prices topped $4 per gallon in March 2022, it took until September for them to come back to below $4.
