The Grift and Graft are beyond staggering.
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 OPIS pricing 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 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 Russia’s war on Ukraine found 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.
U.S. oil producers are barely stepping up their output, refineries are running at full-throttle, and domestic stocks are getting depleted fast. The upshot: American consumers are set to keep paying more for fuel to stay inside the U.S.’s borders.
“This is all just going to end so badly,” said Matt Smith, director of commodity research at commodities- and shipping-data provider Kpler. “We have to essentially get squeezed to the point where prices move higher to stop the barrels leaving.”
The Trump administration is trying to tamp down rising prices, including by waiving restrictions on trade between U.S. ports and releasing oil from strategic stockpiles. Trump said last week he supports suspending the federal gasoline tax. Gasoline prices nationally averaged $4.51 a gallon on Sunday and could keep climbing into Memorial Day weekend, the starting gun to the busy summer driving season.
The administration has said it wouldn’t impose a ban on energy exports. Energy Secretary Chris Wright said on CNBC last week that the U.S.’s economic future depends on selling its energy abroad and that this was a top item on the Trump agenda.