Higher Gasoline Prices Eat Into Tax Cut Gain For Consumers

Investing.com - As gasoline prices continue to rise on the back of surging oil prices, the impact on the economy deepens, undercutting disposable income and the benefits of the individual tax cuts.With a national average of almost $3 a gallon, prices are up 24% in the past year and closing in on a four-year high.Economist estimate that each penny a gallon increase absorbs $1 billion in economic consumption a year from elsewhere in the economy.Gas prices averaged $2.49 a gallon in 2018. If prices average $3 a gallon this year, that's $51 billion in spending.The tax cut package is supposed to save individuals $122 billion in 2018.The key to the equation going forward is whether prices retreat, remain at this level or move higher. Deutsche Bank (DE:DBKGn) estimates that a sustained $1 increase in gasoline prices would completely offset the disposable income games from the tax cut.