Higher gas prices didn't slow down consumers, drivers in March

We are starting to see the economic data from the first month after the bombs started falling in the Middle East. And it looks like American consumers haven’t really changed anything about their spending habits beyond having to spend more for gasoline, as Tuesday’s retail sales numbers didn’t show any consumer slowdown.

A spike in gas prices due to the Iran war, now in its eighth week, resulted in a hefty 1.7% gain in retail sales in March after a revised 0.7% increase in February, according to the Commerce Department’s report on Tuesday. The figure marked the fastest one-month increase in retail sales in more than three years.

The report marks the first read on spending to capture the effects of the Iran war.

Excluding gas prices, retail sales were up 0.6%, helped in part by government tax refunds and warm weather.

Business at gas stations rose 15.5% percent.

The 0.6% increase ex-gas sales is the key stat there, as non-energy inflation was at 0.2% for April, so that indicates real growth that was as good as we had in the first two months of 2026, and possibly better.

We also don’t see any changes in driving habits of Americans so far, as gas usage is not really any different than what we have seen in the last 3 years (I am leaving out April 2020's figures, since that was the peak of COVID shutdowns).

We also have yet to see gas availability be any different than it’s been in recent years. If anything, gas is more available in America now than it was 3 years ago.

But even though we have yet to see shortages of oil or gasoline in either the US or the rest of the world, those are likely to come soon if the blockades in the Strait of Hormuz continue past this month.

The vital energy channel has been largely closed to non-Iranian shipping since war began at the end of February, choking off hundreds of millions of barrels of supply. Consumer nations have been using up buffer inventories that they hold for emergencies to cope with the shortfall.

While international forecasters already acknowledge that conflict is sapping economic growth and oil demand, merchants including Vitol Group, Gunvor Group and Trafigura Group warned on Tuesday that the situation will get even worse if Hormuz doesn’t open up soon.

“We’ve borrowed supply,” Vitol Group Chief Executive Officer Russell Hardy said at the FT Commodities Global Summit in Lausanne, pointing to drawdowns of inventories from a variety of sources. “But you can’t do that forever. There are recessionary consequences from having to ration that demand.”

Benchmark oil futures rallied about 30% since the war began. They spiked to almost $120 a barrel in early March but have since subsided, trading near $95 on Tuesday amid tentative hopes the US and Iran can reach some kind of peace deal.

I wanted to look at what we’d expect at $90 oil. The last time we hit that mark was in September 2023, and gas prices in September and October 2023 were between $3.50 and $4 a gallon.

One difference is that September and October are the off-season for gasoline usage, as Summer ends and school years begin. In April 2026, we are still a month away from the Summer driving season and the typical increase in gas prices that goes along with that. And just because oil is back toward $90 a barrel instead of triple digits, don't expect gas prices will be falling back under $3 any time soon.

Energy observers are increasingly acknowledging a bottom line for motorists that prices at the pump are likely to be elevated for the foreseeable future — no matter what happens in the short term in the Strait of Hormuz and with another round of peace talks on tap this week.

“We will probably see those high prices sticky for longer,” CIBC Private Wealth senior energy trader Rebecca Babin told Yahoo Finance on Monday.....

Any easing of gas price pressures is likely to be slow and unsatisfying for drivers — as well as for Republicans facing midterm voters — in part because of a historical phenomenon that economists have taken to calling “rockets and feathers.”

As the Federal Reserve Bank of St. Louis explained in 2022, crude oil and refined gas prices don’t always move in tandem. They often shoot upward together (like a rocket), but when crude oil prices later ease, refined gasoline prices sometimes drift down at a much slower rate (like a falling feather).

The formal economic term for the phenomenon is “asymmetric pass-through,” and it stems from a variety of causes, including the lag between refiners buying crude oil and then selling their refined product and the need to preemptively protect bottom lines in moments of uncertainty.

Let's also account for good old fashioned profit-hoarding, as why wouldn't oil companies and gasoline refiners take advantage of a good thing for as long as possible (there are stockholders to satisfy, you know!). And I bet Trump/GOP aren't going to be looking too closely at any possible price-gouging, given that environmental group Climate Power estimates that fossil fuel interests spent $445 million in the 2024 election cycle in donations and lobbying, overwhelmingly in support of Trump and other Republicans.

It didn't cut into other areas of consumer spending for March, but let's see what happens now that we've been dealing with these higher gas prices for nearly 8 weeks, and planned spending and travel starts to be done with those increased costs in mind. Whether it's in wage growth falling below inflation, record-low consumer sentiment, or in the higher gas prices rippling over to make other products cost more, you can't think that Americans are going to continue like nothing has changed since February.