The $4.50 Gas Economy: Fewer Nights Out, More Belt-Tightening

Traffic on westbound interstate 80 in Emeryville, California, US, on May 22, 2025. Photo by David Paul Morris /Photographer: David Paul Morris/

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(Bloomberg) — Higher prices at the pump are making Avarisse Crawford rethink her spending. The 33-year-old has started scaling back her “fun budget,” meaning fewer steak dinners and happy hours with coworkers — instead she’s seeking out free activities, like going to the park.

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“I’m making sure to cut open bottles to finish all of my products,” said the Philadelphia resident. Driving less is not an option for Crawford, who commutes five days a week to the office of the nonprofit where she works. She also makes twice-a-month road trips to visit a sick relative.

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Gasoline will be a pain point for travelers this Memorial Day weekend. For many Americans, cutting back has already become the new reality after gas prices topped $4.50 a gallon for the first time in nearly four years. 

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As the Iran war drags on, the average nationwide retail price is now less than 50 cents away from an all-time high, according to American Automobile Association data. In California, regular unleaded gasoline has surpassed $6 a gallon. The unofficial start of summer marks the beginning of a period of heightened demand, which risks further depleting US gasoline stockpiles and sending prices even higher. 

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In an effort to put a ceiling on prices, the Trump administration has pulled on a wide range of policy levers, including releases from the Strategic Petroleum Reserve, a waiver of the Jones Act and discussion of a federal gasoline tax holiday. But so far, it’s been unable to counter the surge.

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With many Americans dependent on their cars, gasoline demand is unlikely to meaningfully stall at current prices. That sets up a squeeze on consumer finances that will ripple through the rest of the economy as it eats into spending on nonessentials. 

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“It’s a basic necessity in most parts of America to drive a car to work, to school, to kids’ drop-off. It’s hard to get by without it in many places,” said Heather Long, chief economist at Navy Federal Credit Union. “People have to absorb this cost.”

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Fuel Squeeze

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There’s little relief in sight with crude prices around $100 a barrel and the Strait of Hormuz still effectively closed. Some on Wall Street, like economist Jeff Currie, fear a brewing energy crunch. The senior adviser at Carlyle Group expects the US to run into problems by July.

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Gasoline stockpiles are at the lowest for this time of year since May 2014. At the same time, US gasoline imports are hovering near their lowest seasonal level in a decade, while exports are in line with seasonal averages. Meanwhile, refineries are focused on producing as much jet fuel as possible, skewing output away from gasoline.

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The combination means stockpiles will only tighten from here: Morgan Stanley said they’re on track to finish August at the lowest seasonal level on record.

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The market is “set up bullishly,” according to Vikas Dwivedi, global energy strategist at Macquarie. And while consumers have pulled back some above $4 a gallon, if prices remain below $5, the drop in demand will likely be less than expected, he added.