For over a year now, American consumers have been giving survey responses indicating that they feel that gasoline is becoming less affordable. This is no surprise, since pump prices have been climbing even longer than that. In fact, the national average gasoline price has been on a rising trend for the past two years, after having dipped to the $2.00 per gallon level in Winter 2016. During the month of our most recent Energy Survey sample, taken in July, the national average was $2.93 per gallon–nearly a dollar more.
On the other hand, the price that consumers tell us they would find unaffordable–in the sense of believing that they would have to change the way they get around–has not significantly changed over the past year and a half. As seen in the chart below, that price has recently been hovering just above $5 per gallon. This threshold of “pain at the pump” fell from an average of about $5.70 per gallon over the first year of the Energy Survey, when the national average gasoline price was $3.56 per gallon, to $5 per gallon in 2016, reflecting the drop in gasoline prices that occurred in the second half of 2014. It has now inched back up to an average of $5.13 per gallon over the past survey year (ending in July).
Because the affordability index is based on the ratio between the price that consumers say they’d consider unaffordable and the actual price at the pump, it can be quite sensitive to changes in gasoline prices. That’s why the latest gasoline affordability index of 78 (±5), based on our Summer 2018 sample, is down so significantly from its value of 114 (±7) last spring. The affordability index is scaled so that a value of 100 means that gasoline prices would have to double (i.e., increase by 100%) before reaching that level of consumer discomfort. An affordability index of zero means that consumers already find it unaffordable, a situation reported by less than 3% of consumers on average.
In short, the average gasoline price have risen more than the average price that consumers tell use they would find unaffordable. Consumers are therefore feeling closer to the edge of their comfort zones in terms of what they have to pay for fuel.