The Grinch and the Pinch at the Pump, acccording to OPIS

Jan. 1, 2020
Monthly household motor fuel expenses up 76% in two years
Commodity inflation has reared its ugly head at the pump this holiday season in the guise of gasoline prices that are nearly $1.35 gal higher than they were during the twelve days of Christmas in 2008, according to Oil Price Information Service (OPIS) retail data.

Average prices for gasoline are currently flirting with $3.00 gal, and by simply matching typical historical performances, U.S. pump prices could rally to their second highest level in recorded history next spring.

“Consumer Reaction To High Gasoline Prices: What It Means for Retailers”
The slow but steady rise in prices in 2010, largely motivated by 25 month highs in global crude oil prices, has resurrected an age old argument among consumer analysts and economists. Will pain-at-the-pump crimp holiday spending, or alter behavior after the 2010 shopping season is complete and the bills come due?

A new study about to be released by PortiaGroup with data provided by OPIS looks at some of the likely consequences of the gasoline price surge. The study, aptly titled “Consumer Reaction To High Gasoline Prices: What It Means for Retailers” concludes that rising gas prices are more relevant to household budgets than a cursory glance at numbers might indicate.

PortiaGroup brings together leading economists from Ivy League universities to analyze data and generate economic insight for the opportunities, challenges and strategic decisions businesses face. This invaluable study cites evidence that higher fuel prices motivate stunning behavioral changes in shopping patterns, and influence choices for premium versus discount merchandise well beyond the realm of fuel!

Example: On a national basis, the average household will spend roughly $305 on gasoline in December 2010, up 13.6% from last year but up a whopping 76% from December 2008 when consumers paid about $1.65 gal for fuel. This year’s numbers represent an average 7.4% of median household income. That is up 6.5% from last year, and compares with a 4.2% bite in December 2008.

Oddly, it’s Big Sky country that finds motorists enduring the greatest fuel price damage to budgets. Households in Montana currently see gasoline expenses that reflect about 12.7% of family income. Mississippi is next on the list with families there spending about 12.3% of household income on fuel.

Southern states tend to see greater fuel expenses than wealthier states in the northeast, upper Midwest, and on the West Coast with Louisiana, South Carolina, and Arkansas households all yielding data that suggest fuel costs well above 10% of income.

 

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Higher income areas in the northeast see less of a bite. The average household in New York will spend less than half the amount that Montana or Mississippi families might expect to pay for fuel, and the aggregate expense totals just 4.71% of income. But New York families have nevertheless seen a rise of more than 12% from last December, according to the extensive data sets provided in the study. Other states where fuel costs account for less than 6% of household income include Maryland, Massachusetts, Nevada, Illinois, Hawaii, Colorado, and Minnesota.

The OPIS & PortiaGroup report represents an invaluable tool with indispensable insight for any companies in the retail space, and looks at predictable consumption outcomes across a broad spectrum of products nationwide. The study includes a look at what state-specific fuel prices might look like if early 2011 follows anything resembling recent price templates for retail gasoline.

Smart retail executives can use the data and analysis to get ahead of what might be stunning behavioral changes in 2011 and proactively adjust merchandising to capitalize and enhance the bottom line.

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