Energy affordability evens out in 2016

For the first time since the start of our quarterly Energy Survey, home energy and gasoline have run neck-and-neck in terms of affordability for an entire year. That is to say, 2016 saw no statistically significant difference between the two indices, a situation never before observed for four consecutive quarters. Though customers recently feel similarly about the costs of gasoline and home energy within each quarter, the affordability scores for both have dropped significantly since peaking in January. The gasoline affordability index, which seems to vary seasonally, dropped 41 points from January to July. The index for home energy dropped only half as much, by just under 21 points.


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.

Consumer views on the affordability of home energy have been remarkably stable over time. The 2016 average score of 127 is only slightly (and insignificantly) higher than the pre-2016 average of 124. In contrast, consumers have found gasoline to be significantly more affordable in 2016 than in past years. The 2016 gasoline index average of 124 is nearly 50% greater than the pre-2016 average of 84. The jump perceived affordability is largely explained by the price at the pump. In 2016, the national average retail price of all grades of gasoline was $2.25 per gallon, significantly lower than the of $3.08 per gallon average from October 2013 (our first quarter of Energy Survey data) through 2015. This pattern also reflects the fact that consumer responses to our survey question about “What would the price of gasoline have to reach before it became unaffordable to you?” did not change much when gasoline prices fell.

In any case, 2016 has consumers feeling similarly about how well they can afford both gasoline and home energy. That’s in contrast to what we saw over the first five consecutive quarters of Energy Survey data, when consumers on average felt that gasoline was only about half as affordable as home energy.