First time in August 2022! Average U.S. gasoline price hits $4 per gallon mark

# Long Yue

Source: Wall Street CN

U.S. average gasoline prices have surged past $4 per gallon, marking a nearly $1 increase since the U.S.-Israel strike on Iran on February 28. JPMorgan estimates that if gasoline prices rise to $5 per gallon and remain elevated, the roughly $200 billion in tax-cut benefits from the **One Big Beautiful Bill Act (OBBBA)** will be entirely wiped out by higher fuel costs. Additionally, a new poll shows that 55% of Americans say their household finances have been hit by rising gas prices, while 87% expect prices to climb further.

The U.S. national average retail gasoline price has broken through the $4 per gallon mark for the first time since August 2022. Since the joint U.S.-Israel attack on Iran on February 28, pump prices have risen by nearly $1 per gallon.

Rising fuel costs are directly eroding U.S. household purchasing power. A new Reuters poll finds that 55% of Americans report their household finances have been affected by higher gasoline prices, with 21% describing the impact as "significant." Meanwhile, 87% of respondents expect gas prices to rise further in the coming month.

Driven by events including Iran’s attack on a Kuwaiti oil tanker, WTI crude briefly topped $106 per barrel, while Brent crude rose above $109. Surging energy costs are not only directly straining U.S. household finances but also threaten to offset the tax-cut windfall delivered by last year’s **One Big Beautiful Bill Act (OBBBA)**.

## The $5 Threshold: Tax-Cut Benefits at Risk of Erasure

JPMorgan economist Michael S. Hanson calculates that if gasoline prices remain at $4 per gallon for the full year, U.S. households will face an additional $110 billion in fuel costs. This leaves a buffer, as the OBBBA is estimated to deliver just over $200 billion in personal tax relief for households this year.

However, JPMorgan has drawn a clear red line: should gasoline prices rise to $5 per gallon and stay there, the extra household spending on fuel would reach approximately $233 billion—**fully offsetting the tax-cut benefits**. Given persistent supply shortages, this price level is far from a remote possibility before mid-April.

Compounding the issue, the tax-cut benefits themselves are underdelivering. As of March 25, tax refunds this filing season are only about $32 billion higher than the same period last year. At this pace, the full-year increase in refunds is projected to be roughly $55 billion—**well below market expectations**.

Structural inequities further compound the pain. Tax-cut benefits are highly concentrated among high-income households, while gasoline spending is relatively evenly distributed across income brackets. Gasoline accounts for over 3% of total spending for households in the lowest income quintile—**more than a full percentage point higher** than for the top quintile. This means the inflationary pain from higher oil prices falls far more acutely on middle- and lower-income families than aggregate figures suggest.

Politically, President Trump’s approval rating on cost-of-living issues has dropped to 29%, with 63% of Americans disapproving of his handling of prices. Trump himself acknowledged the economic costs of the conflict on Thursday, stating: "I see what’s happening in Iran, and I say, ‘I don’t want to do this, but we have to.’"

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## Structural Impact: Middle- and Lower-Income Households Bear the Brunt

The distribution of oil-price shocks and tax-cut benefits differs sharply across income groups. Tax relief is heavily skewed toward the wealthy, while gasoline spending is spread relatively evenly.

For households in the lowest income quintile, gasoline consumes more than 3% of annual total spending—**over a full percentage point more** than for the highest-income households. As a result, middle- and lower-income families feel the pinch of rising fuel prices more immediately and acutely, while benefiting far less from the tax cuts. The actual drag on consumption from high oil prices will be disproportionately concentrated on those with weaker purchasing power.

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