US Energy Costs Add US$447 Burden to Households

US households are facing an average increase of US$447.19 in energy costs as conflict in the Middle East continues to affect fuel markets, according to analysis from Moody’s Analytics.

The additional cost reflects higher spending on petrol, diesel and jet fuel over three months of fighting. Across the country, the added burden reaches close to US$60bn, placing further pressure on consumers at a time when affordability remains a challenge for many households.

Moody’s Chief Economist Mark Zandi says the situation carries wider implications for the economy if elevated energy costs persist.

"Unless the war ends soon, financially pressed consumers will have no option but to turn more cautious in their spending, threatening the already soft economy," he said, speaking with CNBC.

Moody’s estimates that if energy prices remain at current levels through February 2027, the average household could face almost US$2,000 in additional costs.

The figures arrive as households continue to balance everyday expenses against slowing income growth, lower savings and rising debt levels.

Petrol prices account for much of the increase

Petrol remains the largest contributor to the rise in household energy spending.

Around half of the additional expenditure since the conflict begins comes from higher petrol prices. Data from motoring organisation AAA shows unleaded petrol averages US$4.39 per gallon in late May. That represents an increase of more than 47% since the beginning of March.

The impact varies widely across the US. An NBC News analysis of AAA county-level data finds Kingsbury County in South Dakota records the largest increase in the country. Petrol prices there rose by 87% to US$4.57 per gallon since the conflict begins, an increase of US$2.13.

At the opposite end of the scale, Whitley County in Indiana records a rise of US$0.73 per gallon over the same period.

State policies also influence outcomes.

Georgia suspends its state fuel tax of US$0.33 per gallon in mid-March. The measure helps limit the average increase in petrol prices to US$1.18 per gallon, making it the second-lowest rise among states.

Illinois records the largest state-level increase. Average petrol prices there climb by US$1.84 per gallon.

For consumers, the effect is immediate. Fuel remains a regular expense for households and higher prices at the pump quickly affect monthly budgets. As costs rise, households allocate more money to transport and less to other spending categories.

Moody’s analysis indicates that petrol alone accounts for a substantial share of the national increase in energy expenditure, making it a key factor behind the US$447-average household burden.

Diesel and jet fuel add further pressure

The effect of the conflict extends beyond petrol, as diesel prices also hike sharply. 

Since early March, diesel prices rise by about 47% to approximately US$5.52 per gallon.

The increase translates into around US$20bn in additional spending by American consumers. According to the analysis, diesel becomes the largest component of the overall energy cost increase after petrol.

Higher diesel prices can also affect a wider range of goods and services because transport costs influence supply chains and distribution networks.

As businesses pay more for fuel, costs can flow through to consumers. Air travel also becomes more expensive.

Rising jet fuel costs contribute nearly US$10bn in additional consumer expenses. Federal inflation data shows air fares in April are more than 20% higher than a year earlier.

The combined effect of higher petrol, diesel and jet fuel prices creates a broad increase in energy-related spending across the economy. Consumers encounter higher costs whether they drive to work, receive delivered goods or travel by air.

The pressure comes at a time when many households are already managing stretched finances, making fuel-related expenses a growing concern.

Savings fall as debt rises

The impact of higher energy costs is becoming visible in household finances.

The personal savings rate falls to 2.6% in April. That represents one of the lowest readings since the global financial crisis and suggests households continue to use reserves accumulated during the pandemic period.

At the same time, credit card borrowing continues to increase.

Data from the New York Federal Reserve shows American credit card debt reaches US$1.25tn during the first quarter of 2026. The figure is up close to 6% compared with a year earlier and approaches the record level reached at the end of 2025.

Gregory Daco, Chief Economist at EY-Parthenon, outlines the challenge facing consumers: "Consumers are increasingly facing an income squeeze, which is forcing them to use savings, credit and wealth to sustain their spending patterns," 

Income growth provides little relief. Personal income remains flat in April, falling short of economists’ expectations for a 0.4% increase.

Goldman Sachs projects that elevated energy prices continue to "erode" consumer spending power through the remainder of 2026. The bank expects lower-income households to experience the greatest impact because food and energy account for a larger share of their budgets.

Costco reports "record-breaking" petrol volumes during its latest fiscal quarter as motorists seek lower-priced fuel options.

McDonald’s CEO Chris Kempczinski says spending among lower-income consumers "may be getting a little bit worse" as energy costs rise. 

Moody’s analysis also finds that rising energy costs more than offset the estimated US$384 benefit per household associated with larger tax returns under President Donald Trump’s fiscal legislation. Mark notes that much of the benefit from those tax measures is already absorbed by higher energy expenses.

As fuel costs remain elevated, households, businesses and policymakers continue to monitor whether energy markets stabilise or place further pressure on consumer finances and economic activity.