High gasoline prices crimping drivers’ spending at the pump

Soaring gasoline prices have left many consumers with no choice but to cut spending on non-essentials, but it might be coming full circle by stopping some drivers from filling up their tanks.

This “demand destruction” occurs when persistently high prices cause demand to drop. It’s an unwelcome sign as consumers face the highest inflation in four decades with no relief in sight.

Data from the Energy Information Administration shows demand over the last several months is already lagging the same period a year ago by as much as 3%, depending on the week.

Persistently rising inflation is putting ever-increasing pressure on consumers. Their spending held up through most of 2021 and into 2022, seemingly impervious to higher prices for everything from food to clothing. But Russia’s invasion of Ukraine in February worsened already high energy prices. Russia is a leading crude producer and sanctions against the nation have cut its production off from much of the global oil supply.

U.S. crude oil prices are up more than 60% this year. That’s lifted gasoline prices to all-time highs, averaging $6.46 in Los Angeles and $5.20 in New York.

The slowdown in demand threatens a wide range of businesses that rely on a summer pickup in activity as Americans vacation, take

road trips and just generally hit the road in bigger numbers for a wide range of activities. Falling gas consumption could signal worsening recovery prospects for restaurants, hotels and other businesses that are still struggling to regain financial ground lost during the pandemic.