‘Almost exactly offsetting the boost’: Higher gasoline prices this year could wipe out tax refunds from Trump’s One Big Beautiful Bill Act

If the Strait of Hormuz remains closed three more weeks and oil reaches $110/bbl in March, gas could peak at $4.36/gal in May, costing Americans an average of $740 more for gas this year—effectively offsetting the ~$748 projected increase in tax refunds. Gas has already risen to $3.91/gal after recent strikes (spiking above $115/bbl this week), Oxford and Stanford analyses warn of material consumer pain and an estimated $60bn higher gas spend in 2026 if averages reach ~$3.60/gal. EIA projects national gas averages of $3.34 for 2026 and $3.18 in 2027 while Goldman Sachs says oil could remain >$100/bbl through 2027; policy moves like a temporary Jones Act suspension are expected to have minimal downward impact (~$0.03/gal per estimates).

Analysis

Energy-driven cost shocks will act like a concentrated tax on discretionary spending for lower-income cohorts while providing an earnings tailwind to parts of the energy complex and midstream infrastructure. The supply disruption mechanics (rerouting tankers, insurance premiums, repair-interval drag on Gulf output) create a multi-month persistence path for crude differentials and freight spreads that is asymmetric to the upside — upside is fast via military escalation, downside is slow because physical capacity and logistics frictions take weeks-to-months to normalize.

Policy moves (temporary regulatory forbearance, targeted SPR releases, meetings with majors) are binary catalysts with short notice but limited structural effect; they can shave volatility but rarely remove the secular margin transfer from consumers to energy producers and service providers. The distributional fiscal impact magnifies credit and demand stress in lower-income segments, raising default/cash-flow risk in subsegments of consumer finance and regional/staples retailers that are wage-sensitive.

Second-order winners include refiners with export flexibility, freight/tanker owners who can monetize rerouting and storage contango, and insurers/reinsurers exposed to war-risk premiums; losers include jet-fuel intensive airlines, long-duration consumer discretionary names, and municipalities with tight budgets facing higher fuel subsidy needs. Watch cross-asset flows: energy strength coupled with cash-constrained mass consumers historically compresses small-caps and boosts defensive staples and real assets (pipelines, storage) on a 3–12 month horizon.

Key Decisions for Investors

• Pair trade (3–6 month): Long Valero Energy (VLO) equity or 3–6 month call spread sized 2–4% NAV vs short US airlines (AAL or DAL) for equivalent notional. Rationale: capture refinery crack upside and jet-fuel margin squeeze on airlines; target asymmetric 2:1 payoff if Brent stays elevated. Hedge/exit: close if Brent < $85 for 10 trading days or VLO outperforms sector by 15%.
• Midstream durable play (6–12 month): Buy Kinder Morgan (KMI) or increase allocation to fee-based pipeline exposure; target 4–6% yield + option-like optionality from higher throughput. Risk/reward: limited downside due to fee contracts, upside from volume/FT capacity re-pricing; trim on sustained crude < $80 for 60 days.
• Macro inflation hedge (1–2 year): Increase exposure to TIPS/5y breakeven (buy 5y TIPS or 5y breakeven swaps) sized to offset real-consumption drag risk. Rationale: upward pressure on energy feeds CPI; reward is real-income protection while downside is modest if deflationary shock emerges—cap size to 2–3% NAV.
• Tactical freight/tanker optionality (2–6 months): Buy selective tanker ETF/ETN exposure or long freight futures/options where available (or long publicly listed tanker owners) to capture elevated voyage rates and storage economics. Risk/reward: high variance but strong payout if chokepoint persists; cap position size and take profits on a 30–40% move.