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WASHINGTON — <\/span>The U.S. economy was supposed to start the year with a bang<\/a>, fueled by an unusually large jump in tax refunds from President Donald Trump’s tax cut legislation. Yet spiking gas prices are on track to eat up those refunds, leaving most Americans with little extra to spend. <\/p>\n \u201cNext spring is projected to be the largest tax refund season of all time,\u201d Trump said in a prime-time speech in December<\/a> that was intended to address voters’ concerns about the economy and stubbornly high prices. <\/p>\n But that was before the Iran war<\/a>, which began Feb. 28. Oil and gas prices have soared<\/a> since then, with the nationwide average price of gas reaching $3.94 Sunday, up more than a dollar from just a month earlier. <\/p>\n Gas prices are likely to remain elevated for some time, even if the war ends soon, because shipping and production have been disrupted and will take time to recover. Economists now expect slower growth this spring and for the year as a whole, as dollars that are spent on gas are less likely to be used for restaurant meals, new clothes, or entertainment. <\/p>\n Lower and middle-income households are likely to be hit particularly hard, because they receive lower refunds, while spending a greater proportion of their earnings on gas. <\/p>\n \u201cThe energy shock is to going to hit those who have the least cushion,\u201d said Alex Jacquez, chief of policy at the left-leaning Groundwork Collaborative and a former economist in the Biden White House. “And it doesn’t look like those tax refunds are going to be here to save them.\u201d<\/p>\n Neale Mahoney, director of the Stanford Institute for Economic Policy Research, calculates that gas prices could peak in May at $4.36 a gallon, based on oil price forecasts by Goldman Sachs, followed by slow declines for the rest of the year. The notion that gas prices decline much more slowly than they rise is so ingrained among economists that they refer to it as the \u201crocket and feathers\u201d phenomenon.<\/p>\n In that scenario, the average household would pay $740 more in gas this year, nearly equal to the $748 increase in refunds that the Tax Foundation has estimated the average household will receive.<\/p>\n Through March 6, refunds have risen by much less than that, according to IRS data<\/a>: They have averaged $3,676, up $352 from $3,324 in 2025. Still, average refunds could rise as more complex returns are filed.<\/p>\n Other estimates show similar impacts. Economists at Oxford Economics, a consulting firm, estimate that if gas prices average $3.70 a gallon all year, it will cost consumers about $70 billion \u2014 more than the $60 billion in increased tax refunds. <\/p>\n The gas price spike comes with many consumers already in a precarious position, particularly compared to 2022, when gas prices also soared because of Russia’s invasion of Ukraine. At that time, many households still had fattened bank accounts from pandemic-era stimulus payments and companies were hiring rapidly and sharply lifting pay to attract workers. <\/p>\n Now, hiring is nearly at a standstill<\/a> and Americans’ saving rate has steadily fallen in the past few years as many households borrow more to sustain their spending. <\/p>\n \u201cWhen you start looking across the perspective from a consumer side, you\u2019re seeing people who have maxed out their credit cards, are using \u2018buy now, pay later\u2019 to purchase their groceries,\u201d said Julie Margetta Morgan, president of The Century Foundation, a think tank. \u201cThey’re making it work for now, but that can fall apart quite quickly.\u201d <\/p>\n