Surging gas prices are hurting lower income households harder, New York Fed study shows

• Lower-income households (under $40,000/year) cut real gas consumption by 7% during the March 2026 price spike, likely through carpooling or public transit, while high earners (over $125,000) reduced consumption by only 1%
• Gas prices jumped nearly $1 per gallon to $3.81 in March following the Iran war and have since climbed to $4.30, with overall energy prices up 56% post-pandemic
• The disparity in response is larger than during the 2022 Russia-Ukraine energy shock, reflecting Fed Chair Powell's repeated warnings that persistent above-target inflation disproportionately harms those least able to afford higher prices

Summary: New York Fed Study on Gas Prices and Income Disparity

Key Findings:

A New York Federal Reserve study reveals a stark "K-shaped" consumption pattern during the March 2026 energy price spike, with lower-income households bearing a disproportionate burden from surging gas prices.

Income-Based Impact:

• Households earning under $40,000 annually increased gas spending by only 12% while cutting actual consumption by 7%
• High-income households (over $125,000) raised spending by 19% and reduced consumption by just 1%
• Lower-income consumers compensated through carpooling and public transit substitution, while wealthier households maintained consumption patterns

Market Context:

Energy prices have surged 56% since the pandemic began. During the March spike triggered by the Iran war, gas prices jumped nearly $1 per gallon to $3.81, currently sitting at $4.30 according to the Energy Information Administration. Overall gasoline spending increased 15% in March 2026.

Economic Implications:

The K-shaped recovery continues post-COVID, with wealthy households benefiting from asset appreciation in stocks and real estate while lower-income groups struggle with inflation. Gas prices have risen 28% since March 2020, while average hourly earnings grew only 30%, effectively creating flat real wages.

Fed Chair has repeatedly highlighted how persistent inflation above the 2% target—now running five years—disproportionately affects those least able to afford higher prices.

Historical Comparison:

The current consumption gap exceeds that seen during the 2022 Russia-Ukraine energy crisis, indicating a quantitatively larger disparity in this episode. The study analyzed 2,000 respondents to reach these conclusions.