Gas prices range from $3.60 to $3.90 a gallon in the Cincinnati area as of Monday afternoon, according to GasBuddy.com. Oil prices prices were around $67 a barrel when the United States and Israel attacked Iran on Feb. 28. Since then, those prices have climbed to the mid-$90s. They dropped on word of a ceasefire, and then rose again, when negotiations broke down.
A University of Cincinnati economics professor says it appears Americans are not cutting back on their spending yet.
“Look at car sales. I mean, big cars are still selling! People are still buying those. They’re not cutting back. The question is ‘How long?,’ ” says Debashis Pal. “Part of it is expectation: We are still expecting it is a temporary phenomenon. But if it goes on, we’ll change our expectations.”
Pal says other economic indicators aren't showing much of an effect either.
“You don’t see the impact in the stock market yet. People still believe that things will be OK a few months down the road.”
He says a macroeconomic view misses the effect of high prices on individuals.
“It misses the suffering going on for lower income customers. They’re having a tough time just affording the essentials, so you see the credit card debt is going up for them,” he says. “Upper income customers don’t see the impact that well yet.”
Pal says lower income households can't easily cut expenses when fuel prices rise, and don't have many other choices.
“If you cannot drive your car, cannot go to work, you won’t get paid.”
And it's not just regular unleaded fuel: For every $1 a gallon of diesel rises, Pal says the price of produce climbs about 15%.
He says if prices stay high, or oil climbs to $150 a barrel, then you can expect to see more affluent Americans cutting their spending.
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