January 2017 marks the fourth year of the U-M Energy Survey. In previous years, consumers felt that gasoline was more affordable in January than at other times of the year. But this winter was different: the gasoline affordability index dropped 17 points to 94, the lowest score since July 2015. The decline is only partly explained by gasoline prices themselves, which did see an atypical increase in January this year. In each of the prior three years, gasoline prices fell by an average of $0.50 per gallon from October to January. This time however, the price at the pump actually increased by 9 cents per gallon. Consumers expecting a seasonal reprieve never saw one.
The latest index results also mark the ninth double-digit swing in ten quarters. Despite this volatility in the index, which tracks how consumers feel about affordability, the dollar-level responses to our survey question about “What would the price of gasoline have to reach before it became unaffordable to you?” have not changed much. In other words, the ups and downs of the index can be attribute mostly to the changes in gasoline prices, not changes in consumer views about the dollar threshold for serious pain at the pump.
In contrast to the story for gasoline, the home energy affordability index remains a model of consistency. The January 2017 value increased by a modest 3 points to 119, just below its average since October 2013 of 124. As seen in the chart below, this measure of how affordable consumers think their home energy bills are has rarely deviated from this average, now based on 14 quarters of U-M Energy Survey data.
Note that the error bars are much wider for home energy than they are for gasoline, which reflects how consumer responses about the affordability of home energy are much more variable than they are for gasoline. We suspect that this statistical “squishiness” of views on home energy costs may have something to do with consumers not having as clear an idea of what they pay for home energy as they do for the price of gasoline. The latter is, after all, highly visible and something most Americans get to look at weekly, which is about how often motorists have to fill their tanks. In contrast, home energy is billed monthly. Also, more and more consumers are on an auto-pay plan, and so may not have a very precise recollection of their electric and other home energy bills when we ask about them during the survey.