Over the course of each year we’ve conducted the Energy Survey to date, consumers find gasoline to be most affordable in the winter, when our January sample is taken. These responses — plotted in the chart below — show how consumers feel that gasoline is less affordable at other times of the year, as reflected in notably lower affordability index values derived from the spring (April), summer (July) and fall (October) quarterly samples. For reference, an affordability index of 100 means that the fuel price would have to double (i.e., rise by 100 percent) before consumers would consider it unaffordable. (See this overview of how the affordability index is calculated.)
As of the most recent survey data we analyzed in July 2016, the gasoline affordability index was 104. That’s down nearly fifty points from what it had been in January when it reached a value of 152, which was the highest level of perceived motor fuel affordability since the U-M Energy Survey began in October 2013. Over the first five quarters of the survey, the gasoline affordability index was well below 100, reflecting the fact that gasoline prices had been much higher than they have been more recently.
Even in the 2013-2014 period when respondents considered gasoline to be relatively unaffordable, there was a modest uptick in the affordability index in January before it fell again entering the spring and summer seasons of 2014. Since then, we’ve seen notable jumps in gasoline affordability each winter. The index values of 138 in January 2015 and 152 in January 2016 indicate that American consumers feel that gasoline would not become unaffordable unless its cost would well more than double from the pump prices they were experiencing at the time.
The seasonal trend isn’t shocking, given that gasoline prices are often lower in winter months due to winter fuel blends and a lower level of fuel demand than during the summer driving season. However, the magnitude of the changes in the affordability index is greater than that of the swings in gasoline prices, especially over the last two years.
This can be seen in the next graph, which adds a plot of gasoline prices on an inverse scale along the right-hand axis. The lows and highs of the affordability index coincide with the respective highs and lows of the gasoline price. The reactions of respondents to higher gas prices — i.e., the differences in successive index values — are steeper than the changes in the gasoline prices itself, especially during the July quarters of 2015 and 2016. Statistically, a reason for this pattern is the fact that consumer answers to the question, “At what price per gallon would gasoline become unaffordable to you and your family?” has not changed much even as the price of gasoline has varied significantly. The closer the pump price is to this threshold of unaffordability, the more sensitive consumers seem to be about fuel costs.
Another factor could be that during the winter, vehicles are generally driven less and consumers may also have other expenditures weighing more heavily on their minds. It will be interesting to see if this seasonal trend in the perceived affordability of gasoline persists over the months and years ahead, and to see if other data and information about consumer attitudes can help to further explain the pattern.