Gas prices have risen this month. And if they rise $1.05 per gallon off their current marks, it would eat the disposable income gains of last year’s tax cut legislation, according to Deutsche Bank analysis.
The national average is now $2.76 a gallon, according to GasBuddy, which is close to the most recent high in mid-2015. A $1 gain per gallon would represent a full return to the soaring prices of 2014, when the average price for a gallon approached $3.70. From 2011 to mid-2014, prices were at this level.
While a $1 increase would be required to cancel out benefits for families of all income levels, lower-income families’ gains would be wiped out much more quickly.
In fact, Deutsche Bank analysts expect this to happen sometime this year for these lower-income groups, as the rise in disposable income gets eclipsed by rising oil and gas prices.
Lower-income families usually spend a higher percentage of their budget on gas, making price changes more pointed. The lowest-earning 20% of American families spend 8% of their household budget on gas and oil. For the top 20%, it’s less than 2%.