Same Shock, Different Roads? A K
Liberty Street Economics • • business
Key Points:
- In March 2026, energy prices hit a four-year high due to Iran closing the Strait of Hormuz amid Middle East conflict, causing a sharp rise in gasoline prices and spending disparities across income groups.
- High-income households increased nominal gasoline spending by 19% while barely reducing real consumption (1%), whereas low-income households increased nominal spending by 12% but cut real consumption by 7%.
- Middle-income households experienced intermediate changes, with moderate increases in nominal spending and decreases in real gasoline consumption, illustrating a pronounced K-shaped pattern in gasoline consumption.
- This consumption divergence mirrors patterns seen during the 2022 Russia-Ukraine energy price shock, but the disparities in 2026 are quantitatively larger, showing a greater split between high- and low-income households.
- The study suggests lower-income households may be adapting by reducing usage through measures like carpooling or public transit, while higher-income groups maintain consumption despite higher prices, highlighting socioeconomic impacts of energy shocks.
