Summer driving season is still a long ways off, but we are seeing some really interesting trends unfold in terms of gas prices. According to AAA, the national average price of a gallon of gas currently stands at $2.27, which is down about 3% from where prices were at the end of 2016. As shown in the table to the right, this year’s decline is much weaker than the average YTD change of +1.3% at this time of year, and going back to 2005, there have only been two other years (2007 and 2016) where the national average price saw a larger YTD decline at this time of year.
The chart below compares this year’s move lower in gas prices to a composite of the average YTD change going back to 2005. It’s not uncommon for prices to start the year off on a weak note in January. Once February begins we see a steady move higher until the start of the Summer driving season around Memorial Day when they typically reach their peak for the year. If history is any guide, prices should start to rebound in the weeks and months ahead. It’s certainly not guaranteed, but it is the ‘typical’ pattern.
Rather than focusing on absolute price levels, when thinking about gas prices, it is often helpful to compare current levels to where they were a year ago. When prices are down significantly versus the same time last year, consumers may feel more flush, whereas higher prices may force the consumer to reign in spending elsewhere. On this front, even though gas prices are down on the year, because energy prices, and by extension gas prices, were so depressed at this time last year, the y/y change in gas prices has recently surged. As shown in the chart below, prices at the pump are currently more than 30% higher than they were at this time last year. To find a larger y/y increase in prices at the pump you have to go back more than five years to September 2011.