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Oil companies are playing defense Wednesday on Capitol Hill, insisting they are not exploiting Russia’s invasion of Ukraine to fuel a surge in gas prices.
That’s going to be little comfort to drivers, and those reassurances are going to wear particularly thin for those making less money.
Gas prices broke records last month and are just off those prices now, so there’s been plenty of pain at the pump to go around.
The national average price on a gallon of gas was $4.16 on Wednesday, down from the $4.33 record set on March 11, according to AAA. Even before Russia’s invasion roiled the oil markets, gas prices were rising, just like many other goods and services in a time of high inflation.
In Wednesday’s Capitol Hill hearing, oil company executives acknowledged they made handsome 2021 profits — after 2020 losses. But they insisted they cannot control market prices that are subject to complex calculations on supply and demand. “We have no tolerance for price gouging,” said Michael Wirth, Chevron’s CEO.
The executives’ testimony noted the oil companies are hardly in the retail gas price business. For example, Wirth’s written testimony noted that Chevron
CVX,
only owns and operates approximately 300 gas stations while most of the approximately 150,000 stations are independently-owned businesses that ultimately set the price.
“Low-income consumers have gas and convenience store spending that’s 63% higher year-over-year. ”
But there’s new data serving as a reminder that low- and moderate-income drivers are feeling the squeeze even more.
By the week ending around mid-March — just around the time consumer pump costs crescendoed — all shoppers were spending 59% more at gas and convenience stores year-over-year, according to new data from Numerator, a consumer market and analytics firm.
But as the company tracks the spending habits of 100,000 shoppers for an ongoing index, it shows that low-income consumers have gas and convenience store spending that’s 63% higher year-over-year.
For middle-income shoppers, their spending at gas and convenience stores — often one in the same — is 64% higher. Sales are 53% higher for high-income consumers, Numerator’s index showed.
Low income is defined as up to $40,000 and middle income is between $40,000 and $80,000. High income surpasses the $80,000 point.
Of course, when the price tag on any sort of recurring expense increases, people with smaller budgets feel it more because they have less wiggle room. That’s a harsh reality low-income households are coping with every day now, with inflation rates at 40-year highs. But the gauge is tracking the size of certain spending categories.
“While some of this is tied to increased out-of-home activity versus pre-vaccine lifestyles last year, it’s also a testament to rising prices at the pump,” said Amanda Schoenbauer, an analyst at Numerator.
She noted lower income consumers “are paying 41% more per trip to Gas & Convenience stores, but buying 18% fewer items than they were a year ago, indicating they are paying significantly more per product, including gasoline.”
It may also be a peak at the side costs of different types of work. While higher-paying white-collar jobs may have the luxury of hybrid or remote work that avoids commutes, those possibilities may fade for lower-paying blue collar and service sector jobs.
For example, the March jobs report showed 10% of people saying they teleworked at least a little bit in the past four months due to the pandemic, down from 13% in February. But more than 18% of workers in management and professional occupations said they could telework. Under 2% of people in the service sector occupations, including food preparation and healthcare, said they could telework, according to the data.
“More than 18% of workers in management and professional occupations said they could telework vs. 2% in the service sector.”
Everyone is spending more and getting less in their trips to gas and convenience stores, the Numerator data shows. The number of items purchased per trip to gas and convenience stores is down by 21% for all shoppers.
Crude oil accounts for 61% of the February 2022 cost in a gallon of gas, according to data from the U.S. Energy Information Administration.
Independently-owned gas stations and convenience stores don’t have incentives to jack up prices, said Jeff Lenard, vice president of strategic industry initiatives at the National Association of Convenience Stores.
These stores face net margins around 1%-3% before taxes, he wrote, noting that over half of convenience stores are run by one-store operators. Most of their profits come from the in-store purchases, so lower gas prices means “customers are also likelier to go inside the store to buy a snack, drink or meal — in-store products with higher margins than gasoline,” Lenard said.
