Remember earlier this year when gas prices were on the rise, and all the talk was about how they would keep going higher and further erode the tailwind that consumers were getting as a result of the cheaper prices at the pump? In previous discussions this year of gas prices, we have noted that the increases we saw earlier this year were perfectly normal based on the seasonality of gas prices, and if anything the rise that we were seeing was smaller than average. In the last several weeks, we have not only continued to see a weaker than average increase in gasoline prices, but they have actually started to decline, even as the typical pattern is for prices to rise through the end of May. In fact, through the end of this past weekend, the average price of a gallon of gas in the United States according to AAA was $2.39 per gallon, which is up 6.6% from the $2.24 level it was at to close out 2014. Going back to 2005, which is the furthest back our data on average prices at the pump goes, this year’s increase is the smallest of any year.
The chart below compares the price of gasoline this year to a composite of prices for all years since 2005. In the beginning of March, this year’s YTD increase was right inline with the historical average, but since then prices have been in a steady decline falling by a little more than 2%. As a result of this decline in prices (at a time when prices are typically rising), this year’s year to date increase is nearly eleven percentage points below the average YTD increase we see at this point in the year.
Following the recent declines in average gasoline prices, gas prices are 34.3% below where they were one year ago, and back near the recent lows of -38% we saw back in January. If prices continue to buck the seasonal trend and go lower from here, look for this year/year reading to take out those recent lows.