Summer driving season kicks off this weekend with the Memorial Day holiday weekend, and true to form gas prices have been rising sharply heading into it. From its low earlier this year, the national average price of a gallon of gas according to AAA has risen from under $1.70 per gallon to $2.30 for an increase of 36%. That is certainly a large increase in percentage terms, but for this time of year current prices remain below average. The table to the right compares the YTD change in gas prices through 5/25 in 2016 to each year since 2005. Despite the 15.4% YTD increase, two things to keep perspective of are the fact that this year’s YTD increase is still below the 22.4% average, and current prices are still more than 25% below the average price of $3.094 on this day since 2005. In fact, the only other year since 2005 where gas prices were lower at this time of year than they are now was in 2005.
While prices have been on the increase of late, if the historical pattern holds the bulk of the price gains for 2016 are likely in. As shown in the chart below, based on the average annual pattern for gasoline prices, prices tend to level out in the summer before declining once summer winds down.
Finally, given the seasonal nature of gas prices, rather than focusing on where prices have moved relative to the last several weeks, it makes more sense to compare prices to where they were one year ago. The chart below shows the y/y change in gasoline prices going back to 2006, and on this basis prices are still moderately lower from where they were a year ago (-15.9%). What is most notable about this chart, though, is that prices have been down on y/y basis going all the way back to late 2014, so when you compound y/y declines they really start to add up. For instance, based on current levels, prices at the pump are down 37% from this time in 2014. So, while gas prices are rising, the days of $3 gas are still fresh in investors minds.