Findings based on data from 8 Quarterly Samples, Oct 2013 – July 2015
How affordable is gasoline? Consumers’ answers to that question naturally change as the price of gasoline goes up or down. And being tied to world oil prices, gasoline has the most volatile price among the forms of household energy.
To measure how consumers feel about the affordability of energy, we ask them how much higher its price would have to be before they consider it unaffordable. For gasoline, that means that the price at the pump becomes so expensive that consumers feel they would have to make changes in their household activities.
Figure 1 compares responses to that question to the average price of gasoline when each quarterly energy survey was performed. The price considered unaffordable declined over the past year, but notably much less than pump prices dropped. Averaged across all incomes, the gasoline affordability index jumps from 61 over the first five quarters of data to a mean of 138 in January 2015. It then declined as gasoline prices rose in the following months.
Consumers of different income levels have a different sense of how much they can afford to spend before a given expense seriously dents their budgets. The sensitivity of the affordability index to household income can be seen in Figure 2, which plots it according to income tercile.
Consumers in the top income tercile stand out; their average gasoline affordability index of 99 indicates that the pump price would have to essentially double before they found it to be unaffordable. In contrast, the gasoline affordability index values of 75 and 67 for middle and lower income consumers, respectively, show that pump prices would not have to go up nearly as much before those households felt crimped by the cost.