It’s been awhile since we last provided an update on national average gas prices, but recent trends are definitely worth highlighting. The table to the right shows the YTD change in gas prices based on AAA data this year and at the same point in each prior year dating back to 2005. With average prices at the pump down nearly 2% on the year, this is the first year where prices have actually been down YTD at this point in the year. This is a pretty big divergence from the overall average gain of 12.5% that is normal for this point in the year. Looking at the year by year returns, there has definitely been a trend in recent years where prices didn’t start off the year as strong as they have in the past, but this year’s decline is a bit extreme.
The chart below further illustrates this trend as it compares changes in prices YTD this year to a composite of the average YTD change for all prior years since 2005. By this point in the year, prices are typically already in rally mode leading up to the summer driving season. With oil prices weak this year, though, that seasonal lift has yet to materialize.
Finally, the chart below shows the year/year (y/y) change in gas prices going back to 2006. After prices bottomed in early 2016, the y/y change in prices began to recover and quickly accelerated to the upside the further away we moved from the lows. In late 2016, the y/y change in prices turned positive for the first time in over two years, and then quickly spiked to over 30% in February. As quickly as that y/y change increased, though, it has been declining even faster and is now just barely in double-digits at 12.25%, and if prices don’t start accelerating to the upside the y/y change will likely fall back to negative levels. The reason this is important is that it illustrates a trend we have seen throughout the commodity space in recent months, where base effects have had an exaggerated impact on y/y prices changes. Now that those low levels are falling further out than a year, though, the percentage changes are looking a lot less dramatic. This is also likely to start showing up in inflation statistics which have recently been lifting to multi-year highs on a y/y basis. Going forward, though, some of that upward pressure is likely to subside.