The United States has plenty of oil. Still, gasoline prices continue to rise.
Although the United States is nearly self-sufficient in oil, gas prices remain affected by Iran’s stranglehold on oil shipments in the Strait of Hormuz.
Americans were already struggling with affordability, and prices rose again in April as gasoline prices continued to rise due to high oil prices stemming from the Iran war, impacting supply chains for other goods.
Prices rose 0.6% from March to April, and were up 3.8% from a year earlier, according to the Consumer Price Index, the Bureau of Labor Statistics’ inflation measure. Those measurements exceeded forecasters’ expectations, pushing inflation to its highest level in nearly three years.
Following a record 21.2% jump in March, a 5.4% rise in gasoline prices in the same month again led the rise. Over the year, gas prices rose 28.4%.
“U.S. households continue to bear the brunt of rising energy costs, adding to the deluge of inflation they have endured since the pandemic,” James McCann, senior economist for investment strategies at Edward Jones, said in a note to USA TODAY. “Additionally, the Strait of Hormuz remains effectively closed, increasing the risk that we are not past the peak of these price pressures.”
The agency said the cost of energy, housing and food also rose over the past month, while prices for new cars and medical care fell.
While rising gas prices are one of the quickest and most visible effects of the war on consumers, John Groton, head of Thrivent’s energy, materials and utilities division, told USA TODAY that disruptions to supply chains for fertilizers, metals and cargo also risk raising the cost of food, housing and other consumer goods.
What is the core inflation rate in the United States?
“Core” inflation, the BLS’ measure that excludes more volatile energy and food costs, rose 0.4% in April, slightly higher than in March and February, which came as a surprise to Seema Shah, chief global strategist at Principal Asset Management.
“While the rise in headline inflation was expected, the unexpected core upside is more significant,” Shah said in a note to USA Today. “This tentatively suggests that price pressures will increase, and the Fed will be reluctant to deny that.”
Over the year, core inflation rose 2.8%, highlighting once again how food and energy prices are driving overall inflation.
Consumer sentiment is gloomy, but spending remains solid for now
The University of Michigan’s Consumer Sentiment Index hit another record low this week as Americans worry about rising costs, but consumer spending remains relatively resilient, driven by high-income earners in the K-shaped economy.
Cory Cantenga, LinkedIn’s head of economics for the Americas, said low-income workers are starting to leave.
“Personal consumption growth is still going strong, but the concern would be if that trend starts to change if prices start to rise very rapidly,” Kantenga said. “This is the very foundation of the resilience of the U.S. economy, and when that dynamic changes, companies suddenly have to rethink their growth and hiring plans.”
How expensive is gas?
The national average price for regular unleaded gasoline was $4 a gallon..According to AAA, there were 50 people as of the morning of May 12th. Price increased from $4.Last month it was $13, up from $3..14 a year ago.
Most Americans looking for cheaper gasoline aren’t finding it. In an April molecular survey of car owners, 93% said gas prices had increased in their area last month, and 72% said they had cut other spending to cover the higher prices at the pump.
As a result, SoLo Funds users may have cut back on their spring purchases. Apparel’s share of general merchandise spending fell by about 1.8% from February to March, according to data from the Community Finance Platform. That’s up from the same period last year, suggesting families may be holding off on buying new clothes to fill up their cars at gas stations.
Rodney Williams, co-founder and president of SoLo Funds, said the company’s data also shows how K-shaped economic dynamics are manifesting at gas pumps.
“While higher-income households are primarily absorbing higher gas costs through bulk fueling, budget-conscious consumers are reacting differently by purchasing smaller amounts of fuel, delaying purchases, or saving money elsewhere,” Williams said. “In many cases, consumers are cutting back on discretionary spending not because prices have risen too much in these categories, but because energy costs are becoming a priority within already constrained household budgets.”
President Donald Trump told CBS News on May 11 that he plans to suspend the federal gas tax “for a period of time” to reduce costs for drivers. That same day, Sen. Josh Hawley (R-Missouri) introduced a bill that would suspend the tax, which costs consumers about 18 cents per gallon, for at least 90 days. Congressional Democrats previously introduced a bill in March that, if passed, would suspend the tax until October.
Will food costs still go up?
Shoppers may have noticed an increase in their grocery bills in April, as the BLS Eating Out Index rose 0.7% after falling 0.2% in March. This is an increase of 2.9% for the year.
The agency’s meat, poultry, fish and egg index rose 1.3% for the month, while beef prices rose 2.7%. Prices of fruits and vegetables rose, increasing by 1.8%. Prices of non-alcoholic drinks also rose, rising 1.1%. Prices of dairy products and related products, cereals and bakery products also rose slightly.
Hungry consumers drove up restaurant prices in April, with the Eating Out Index rising 0.2% in the month and 3.6% for the year, according to the BLS.
Will the Fed adjust interest rates in June?
Fed policymakers have remained on the sidelines so far this year as they grapple with risks to both their dual mandates of price stability and maximum employment, with forecasters expecting no interest rate changes at their next meeting in mid-June.
In March, members of the rate-setting committee suggested a one-quarter percentage point cut by the end of this year based on their median rate forecast for the end of 2026. But forecasters are starting to factor in the possibility of a rate hike after stabilizing unemployment and positive employment growth in March and April.
With Chairman Jerome Powell’s term set to end on May 15, senators are expected to soon confirm President Trump’s nomination of Kevin Warsh to head the central bank before the next Federal Open Market Committee meeting. Mr. Warsh will have significant influence over the Fed’s monetary policy, but he will only have one vote out of 12 on the committee.
(This story has been updated to add new information.)
Contact Rachel Barber rbarber@usatoday.comFollow her on X @rachelbarber_
