Not since the holiday season of late 2014 has gas been as expensive as it is now. Americans will drive into the summer season by paying more at the pump, threatening to suck up any savings from lower income taxes.
Averaging close to $3 a gallon, gas prices are up 50-cents from a year ago. For drivers of large SUVs, that adds $28 dollars to the cost of an average month worth of driving. It adds $10 per month for the average hybrid driver, according to USA Today.
This won’t cancel out all the savings for middle income Americans from the tax cut passed late last year, but it eats into it. And it does so in a way that can ding consumer confidence. Workers began seeing a small bump in their paychecks just a few months ago thanks to the change in tax rates. It has taken just two months for gas prices to spike to 3 1/2-year highs.
Crude oil prices, meantime, have been moving higher for the past year. Fueled by tensions over the Iranian nuclear deal and production cuts by OPEC nations, including the precipitous drop in Venezuelan oil amid that country’s growing economic catastrophe, American oil has grown more valuable.
Higher springtime gas prices haven’t taken a toll on spending, yet. Retail sales rose in March and April after a weak start to the year.
Consumers pull up to the pump this week with confidence running hot. The University of Michigan Consumer Sentiment Index is near a 15 year high. In the week ahead, the May data will be released.
American drivers will pay the higher pump prices. How much economic confidence that costs them bears watching for investors.
Tom Hudson hosts “The Sunshine Economy” on WLRN-FM; @HudsonsView.