Name: Sectors Up Close: High oil prices 'kicking the consumer while they're down'
Uploaded: 2026-03-09T17:25:53.000Z
Duration: 6 min 11 s
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As oil drives over $100 a barrel, what does that mean for consumer stocks?

This is sectors up close and we're talking consumer stocks.

Oil surged above $100 a barrel this Monday and American drivers are already starting to see the impact of this latest Middle east conflict at the pump where the price of an average gallon of Gasoline was at $3.45 on Sunday.

Higher energy prices disproportionately do affect poorer Americans.

So could this squeeze consumer staples that sector winner so far this year up over 10% before Monday's open.

While Adam Phillips is managing director of investments at EP Wealth Advisors.

Adam, where in the economy will $100 oil bite the hardest?

Well, for the last couple of years we've been talking about the K shaped consumer and this is really kicking that lower part of the K.

While they're already down, we know that they've been struggling with higher interest rates with a softening job market.

And so add on top of that the fact that we're seeing gas prices at 345 a gall on a national average that's up 15% week over week.

That's the highest since Hurricane Katrina in 2005.

And so these are certainly they're trending in the wrong direction.

And gasoline is something that it's right in front of you.

There's a gas station on every other corner here.

So that's really where it's going to bite the hardest, is these consumers who are already feeling so strapped and so much pressure on their balance sheet.

This feels a very old school thing to happen in the market.

Is US Consumer demand more resilient to oil shocks than it used to be?

You know, we are the old playbook was that there was a lot of vulnerability when we saw supply shocks, specifically in oil prices.

We've been so for the past five years or so.

I think that that means that the economy is a little bit more resilient.

But I would also caveat with the fact that we've seen over the last few years we actually drew down our strategic petroleum reserves and so they are now down about close to 40% from peak.

We drew them down over the last few years and so we come into this period in a little bit of a weaker spot.

But I would also just go back to the fact that the consumer doesn't know and probably doesn't care that we are a net exporter of oil.

If these are gas prices, are really smacking them in the face wherever they go.

I think that's what ultimately could weigh on psyche.

And as we know, when we talk about the consumer and their willingness and desire to go out and spend so much comes down to confidence.

What does a more cash strapped shopper then mean for consumer goods companies and retailers?

Is this good for retailers at the lowest end as people trade down or will customers be hard hit across the board?

So we own a few more defensive types of retailers and discretionary companies, One of them being McDonald's, one of them being TJX.

And so it's good to have exposure to some of these more resilient types of companies because we do expect many households to trade down.

Now at the same time, what we're watching is going back to that idea about the K shaped economy that we've been talking about for so long.

One of the things that's been supporting that upper end of the K has been the fact that we've seen net worth rise just to these record levels year after year.

So much of that has been driven by a rising stock market.

If on top of oil prices, we see this conflict in the Middle east drag on longer than many expected or hope that it would, that's something that could impact equity values and start to actually weigh on that the higher income consumer as well.

That certainly doesn't bode well for consumer spending which drives so much of broad economic growth.

This is coming just as the trade uncertainty picture had been improving for retailers and consumer goods firms.

Now they need to worry again again, don't they, about disruptions to the supply chain not just in energy, but

This really comes at a tough time for consumers.

We thought we had the trade issues sorted out.

The Supreme Court weighed and voted down President Trump's use of IA when it comes to tariffs, that kind of put it back on the table a little bit.

And now on top of that, we have another supply scare.

It could go to more agricultural types of commodities and hit people at the, at the grocery market instead.

And so this is something that really comes at a tough time for the economy.

One of the things that I've been watching is the fact that savings rates were already low.

How should you position then if we're suddenly going back into a much higher inflation environment?

Yeah, well, hopefully, hopefully this is a, this conflict is short lived.

I think it's already, it shows no signs of abating as we're talking here this morning.

But the way that we're positioned is we came into this year and therefore this conflict focused on diversification.

Magnificent seven that has been driven so much by AI and focused on in some cases the consumer.

We came in with the expectation that the odds of a recession were low and we still believe that's the case.

If this drags on, we will be watching for a number of trends.

Last Friday's jobs report, certainly it got my attention.

If you don't round that unemployment rate, you are 100th of a percent away from 4.5% on the unemployment rate.

And so things are moving in the wrong direction.

Is this just one print or is it the start of the trend?

Right now we are very diversified across sectors.

We are more neutral and we think this can go either way when it comes to the consumer.

That was Adam Phillips of EP Wealth Advisors.

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