Gas price shock deepens a 'K-shaped' divide as low-income drivers cut back but pay more

Key Points:

• Lower-income Americans significantly reduced their gas consumption by 7% after the Iran war began, but rising prices still led them to spend 12% more on gas in March, worsening economic disparities.
• Higher-income households increased their gas spending by 19% while barely cutting consumption, highlighting a growing "K-shaped economy" where wealthier groups maintain or increase spending despite price shocks.
• The report from the Federal Reserve Bank of New York shows that the consumption gap between income groups is larger than during the 2022 gas-price surge following Russia's invasion of Ukraine.
• Overall gas spending rose 15% in March, potentially diverting money from other sectors and slowing inflation-adjusted consumer spending, though the broader economy has shown limited signs of slowing so far.
• Data from the Bank of America Institute indicates that the poorest households now spend a disproportionately high share of their income on gas, leading to reduced discretionary spending among lower-income groups.