When gasoline prices dropped between the summer of 2014 and the beginning of 2015, that dip in the cost of filling up didn’t prompt most Americans to change their attitudes about how high the price would have to get before it felt painfully expensive, according to the most recent results from the University of Michigan Energy Survey.
Since fuel prices have fallen, drivers have enjoyed a substantial windfall to their pocketbooks: gasoline fell from an average of $3.77 per gallon in June 2014 to a bargain level of $2.27 per gallon in January 2015. Nevertheless, that savings of $1.50 per gallon – a whopping 40 percent – did not reset consumer attitudes about how high gas prices would go before the cost inflicted a substantial strain on their household budgets.
For a driver who puts on 15,000 miles a year and with the average fuel economy for new personal vehicles coming in at roughly 25 mpg this year, the difference in price amounts to a savings of $75 a month, or $900 a year. Previously, hikes in gas prices of as little as $20 per month have been blamed for consumers cutting back on their spending and significantly dampening the country’s retail economy. Yet monthly savings of more than three times that amount have not (at least not yet) lowered consumers’ thresholds of “pain at the pump.”
Even when prices at the pump climbed to $2.80 per gallon in May this year, drivers still saved nearly a buck per gallon, or more than $40 a month, compared to price levels a year or so ago.
The U-M Energy Survey, which has now polled 3,000 consumers each season since fall 2013, found that 70 percent of households continued to say that gas at $6 per gallon would be unaffordable. About 40 percent say gasoline would become unaffordable when prices hit $5 per gallon — a level it was at in some markets just a few years ago.
While the increased affordability of gasoline didn’t have much effect on the price at which most consumers would find fueling up to be unaffordable, the drop in prices did increase the gap between the actual price at the time of the survey and the price consumers consider unaffordable. For the first five quarters of the survey, consumers said a 60 percent price hike would hurt their budgets. But once gas prices fell precipitously, the increase would have be 140 percent, survey respondents said. The bigger that gap gets, the more it can be interpreted to indicate that consumers are finding motor fuel to be affordable.
The latest survey results also reflect how lower gas prices are being felt by consumers in the bottom third of household incomes. During the January 2014 survey, gas prices averaged about $3.50 a gallon, and 4 percent of households said they already felt gasoline was unaffordable. By January 2015 gas prices had fallen to $2.27 per gallon and was affordable for nearly everyone in the survey, including the lowest-income households.
As earlier surveys have shown, nearly all consumers find gas to be affordable when the cost is less than $4 per gallon, with 40 percent feeling a pinch to their budgets at $5 a gallon, and 70 percent of consumers calling $6 per gallon gas unaffordable. In other words, by adjusting their discretionary spending, U.S. consumers would be able to cope with even a 50 percent hike in gas prices from the January 2015 levels. That doesn’t mean they wouldn’t complain about it, of course.