The American consumer runs on gasoline, at least to the extent that millions of them drive every day. In many cases, commuters drive dozens of miles per day. Millions more take children to school and run errands. This does not include the larger number of miles people will drive in a short time for vacation over the summer. But elevated gas prices will end some of those vacation plans (which means vacation destinations will lose business).
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It is impossible to find the tipping point at which high gas prices badly hurt America’s family financials. Gas prices vary substantially by state, and each family has both income and travel distance variations. However, the shock of high gas prices has been, and will be, felt by almost everyone, other than the rich.
The average price of gas has hit another all-time record (not adjusted for inflation) at $4.40 a gallon. That is up from $2.99 a year ago. The figures are based on AAA data, which measures a gallon of regular gas nationwide. Premium gas prices have hit $5.04, up from $3.58 a year ago.
GasBuddy measures the price of an average gallon by state. In California, the price is $5.82, while in Washington it is $4.85 and in Illinois $4.80. These states have over 15% of the country’s population, and the median income of each is not enough above the national figure to make these prices more “affordable.” In other words, consumers in these states already have been crippled by the gas price burden.
A forecast of consumer spending is tricky. Unemployment rates have not substantially increased over the past two years. This has been the case with wages as well. However, the cost of living has risen tremendously, with consumer prices rising as much as 10% compared to last year. People may feel financially better off this year because of the stock market and home prices. However, the stock market has collapsed, and home prices may have peaked.
To the extent that America runs on gas, Americans face a difficult summer.
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