Surging Oil Costs Drive Wedge in Economy --- Wartime rise makes consumers pay extra $45 billion while boosting investors

“The largest oil disruption in history is widening a divide in the economy.

 

Americans have cumulatively spent about $45 billion more on gasoline and diesel during the war with Iran than they did during the same period a year ago, according to an analysis of Oil Price Information Service data and federal demand figures. The surging costs are eating an outsize share of low- and middle-income consumers' paychecks, darkening their outlook relative to the well-off.

 

At the same time, investors in oil-and-gas companies are watching their portfolios swell. Big energy returns bolstered a blockbuster corporate-earnings season and added momentum to the artificial-intelligence-led rally that has pushed the stock market to records. While higher inflation and borrowing costs have added stress on less affluent Americans, many economists believe high earners will continue powering the U.S. ahead.

 

President Trump campaigned on cutting Americans' energy costs in half. Now, as higher prices contribute to sagging poll numbers for him and some of the lowest consumer-sentiment readings on record, he has argued that the oil shock is benefiting the energy-rich U.S. in the form of record exports.

 

"The question is, of course, who is the U.S.?" said Isabella Weber, an economics professor at the University of Massachusetts, Amherst. "If we look at the different income groups in the United States, it's really the richest of the rich who benefit from this. The majority of people hardly have any benefit from it and are in fact carrying a much larger cost burden."

 

Weber equated oil shocks to wealth redistribution. Her research on the fallout from events in Ukraine found that roughly 50% of the huge profits from U.S. energy firms in 2022 flowed to the wealthiest 1% of Americans.

 

This year, a 32% gain in the S&P 500 energy sector is shielding shareholders from some of inflation's bite. Oil-and-gas companies' collective earnings climbed in the first quarter to their highest levels in years, according to analytics firm Geologic's Evaluate Energy data. With few signs of new drilling in the American oil patch, a continued closure of the Strait of Hormuz signals even bigger profits and dividends in the months ahead.

 

The current price run-up is pumping tax revenues into communities stretching from Alaska to North Dakota to the small towns speckling West Texas and New Mexico. But a tepid response from American energy producers, as well as technological advances in drilling, suggest the go-go days of the shale boom creating armies of high-paying jobs are over.

 

The number of oil-drilling rigs nationwide dropped 11% over the past year, according to Baker Hughes. The Labor Department estimates employment in oil-and-gas extraction is near its lowest levels in records stretching back to 1972.

 

For Wall Street, that combination of efficiency and capital discipline is boosting potential returns.

 

Free cash flow across Exxon Mobil, Chevron, BP, Shell and TotalEnergies in the first quarter ballooned 84% from fourth-quarter levels, to $36 billion, according to Geologic's Evaluate Energy data. The firm's analysis of 37 smaller U.S. oil-and-gas producers found a 53% collective climb during the period, to $17 billion.

 

That hasn't translated to booming dividends or share buybacks just yet. The start of the wartime price run-up "was so late in the quarter," said Mark Young, senior analyst at Geologic. "If you extrapolate that out [into the second quarter], cash flow must be coming in pretty quickly for them."

 

U.S. crude prices have averaged almost $99 a barrel since April 1, up 59% from the year-earlier period, and there are few signs that energy shipments are beginning to move in earnest through the Persian Gulf. The ripple effect through the globe-spanning supply chain is also boosting shares of U.S. pipeline operators that ferry oil to refineries, fuel makers that turn crude into products and tanker operators that carry petroleum around the world.

 

U.S. fuel prices are still lower than their 2022 peaks, and consumers spend a smaller share of their income at the pump than in decades past. Economists also believe that this year's larger tax refunds have helped many Americans weather the early stages of the shock.

 

"But the flow of refunds will taper dramatically in May, leaving consumers far more exposed to the surge in fuel costs," Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, told clients last week.

 

In March alone, U.S. airlines spent almost $1.3 billion more on jet fuel than they did a year earlier, according to the Transportation Department. If gasoline prices stay near their current levels through 2026, JPMorgan estimates Americans will shell out $172 billion more than they did last year. That figure doesn't include additional diesel costs.

 

The resulting hit to wallets is already exacerbating a split between groups.

 

While year-over-year spending by middle- and higher-income Americans on airlines, lodging and other tourism has grown, according to the Bank of America Institute, lower-income households are pulling back. Fast-food chain Wingstop, pawnshop operator Ezcorp and other companies that often cater to those customers similarly cited the pain of high pump prices during recent earnings calls.

 

Gas stations themselves are also feeling the impact. As prices surged in March, households earning less than $125,000 a year cut how much they collectively fueled up, according to Federal Reserve Bank of New York research.

 

Higher-income motorists' consumption barely budged that month, a departure from how they pulled back during the 2022 shock, said Maxim Pinkovskiy, an economic research adviser at the New York Fed.

 

"One thing that is different in the current situation than in 2022 is that currently high-income households have much more net worth, in particular net worth from financial assets," he said.” [1]

 

1. Surging Oil Costs Drive Wedge in Economy --- Wartime rise makes consumers pay extra $45 billion while boosting investors. Uberti, David.  Wall Street Journal, Eastern edition; New York, N.Y.. 18 May 2026: A1.