Americans now find gasoline to be just as affordable as home energy

Late last year, pump prices plummeted and Americans understandably grew much more comfortable with what they have to pay for motor fuel. The national average retail price of gasoline fell by $1.50 per gallon, from $3.77 in June 2014 down to $2.27 as of January. For a typical personal vehicle that gets 22 miles per gallon and is driven 12,000 miles per year, the savings amount to nearly $70 per month.

In the energy survey, we ask a set of questions to suss out how consumers feel about their energy costs, examining both gasoline and home energy bills. The resulting relative measures of energy affordability are shown in the chart below.


We get at these results indirectly, by asking how high the cost would have to climb before consumers would find it unaffordable, that is, in the sense of needing to make changes in their household activities because of the expense of energy. We compare those responses to the costs that consumers currently experience, either what they say they are paying for home energy when the survey was taken or to the national average gasoline price at the time.

Comparing the price that they think would be unaffordable to the current price gives us the relative measure of affordability as perceived by consumers themselves. We express the measure as the percentage increase over current energy costs that consumers say they would find unaffordable, as seen in the chart.

Until this past January, consumers viewed home energy as roughly twice as affordable as gasoline. Over the first five quarters of the U-M Energy Survey, the national average gasoline price was $3.56 per gallon. After dropping to $2.27 in January 2015, pump prices have crept up to $2.52 per gallon as of April, but that’s still over a dollar lower than they were a year ago. As a result, gasoline prices would now have to rise by roughly 125% before they were considered unaffordable by the average American consumer.

In contrast, home energy costs have been much more stable. For example, the average residential price of electricity was 12.4 (±0.4) cents per kilowatt hour, varying very little since we began the energy survey in October 2013. According to our respondents over the seven quarters of data gathered to date, home energy bills would have to go up by an average of 123% before they were considered unaffordable. That response varied very little over the period (rarely beyond the error bars shown for the home energy affordability measure each quarter).

The upshot is that over the past two quarterly samples, the relative affordability of home energy and gasoline are statistically tied. In both cases, the cost would have to more than double compared to recent levels before consumers considered it to be unaffordable.