Gasoline Affordability

This winter, American consumers don’t find gasoline to be as affordable as they thought it was last winter, but they still feel that the situation is a lot better than it was three years ago.

The U-M Energy Survey’s first quarterly sample for 2017, based on interviewing a nationally representative sample of Americans during the month of January, resulted in a gasoline affordability index of 94 (±5). In other words, if gasoline prices were to double from the national average pump price of $2.47 per gallon in January, the average consumer would need to make some changes in how they get around because of the cost.

This level of perceived affordability is similar to what it has been since last summer. But as shown in the chart below, it’s notably lower than the peak affordability index value seen last winter. Of course, no surprise that consumers found motor fuel more affordable a year ago. In January 2016, the national average retail price of gasoline was only $2.06 per gallon. We estimate the affordability index based on the price that consumers tell us that they would find unaffordable during the survey. It turns out that that price has not changed much even as the prices consumers experience has changed a good deal (mostly for the better) over the past three years.

When we launched the U-M Energy Survey in October 2013, gasoline was at $3.48 per gallon, a full dollar more than what is averaged this year in January when our most recent survey was taken. Until gasoline prices fell in late 2014, Americans felt that gasoline was less than half as affordable as they’ve been finding it to be more recently.

As explained in our Overview of how the indices are calculated, an affordability index of 100 means that consumers believe energy prices would have to double (i.e., see a 100% increase) before they were considered unaffordable. In this context, “unaffordable” means that the energy cost has become so high that consumers feel they would need to change their day-to-day activities in some way. When consumers report that the price they find unaffordable is the same as what they currently pay, then the index is zero.