It used to be that the clearest signs of American consumer sentiment were the ones at the corner gas stations: the higher the prices, the worse people felt.
Nowadays, after years of having gas prices too high float between $2.50 and $4 a gallon, American attitudes no longer flow through the gas line and are no longer defined – at least for now – by the numbers on the pump.
“The relationship hasn’t held the last two years,” said economist James D. Hamilton of the University of San Diego, who has studied the effect of oil and gasoline prices. “I think things have changed.”
Gas prices aren’t anywhere near a six-year low, but consumer sentiment hit a six-year high last month, according to the recently released survey by the University of Michigan. A separate survey by the Conference Board is well above its levels of a year ago, although it retreated slightly in July.
Gas prices are “a daily irritant,” said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. “People notice. Even if you are not pumping gas, you see the gas price every day.”
But that doesn’t make them the center of the picture: Whether it’s massive layoffs, a hiring wave, headlines about home sales or a foreign crisis, gas prices are often overshadowed by other factors – especially when prices are not moving much, Dhawan said.
“Lately, consumer sentiment has been rising because the stock market has been doing very well,” he said.
In metro Atlanta, the average price of regular has roared past $4 a gallon twice: the summer of 2008 and the summer of 2011.
The past six months have seen the average price bounce between a peak of $3.80 a gallon in late winter and a low of about $3.30 a gallon in early spring, according to Gas Buddy. This past week, the region was averaging about $3.50 a gallon.
“It’s something that people have adjusted to,” Hamilton said. “The price of gas is not changing anybody’s plans. Three dollars-a-gallon would look cheap to us now.”
Cheaper than what we have, at least, said Becky Biggs, 31.
She spends about $140 to $160 each month filling up her Kia Soul. Each fill-up costs about $35, said Biggs, who commutes daily between Decatur and downtown Atlanta.
That’s a relatively short commute in metro Atlanta, where average commutes are among the nation‘s longest. Moreover, congestion causes the average driver in metro Atlanta to waste 23 gallons of gas a year, according to a report by the Texas Transportation Institute.
Stafton Bynoe, 28, shuttles from Conyers to work as a security guard in Sandy Springs – 37 miles door to door.
He spends roughly $100 a week on gasoline, he said. “When the price goes down, I do smile. Every little bit helps.”
He fears another spike – there’s already a trade-off between his commuting costs and things he does in his free time, he said. “Ultimately, the more money I have to put into gas, the less I can do other things.”
Gas prices float on a host of factors, although the most critical is oil. New sources of petroleum – along with a dampened demand – has kept a ceiling on prices. On the other hand, higher oil prices also have helped drive much of the new production, making advanced exploration and drilling techniques economical.
The next couple months are promising, said Tom Kloza, chief oil analyst at Gas Buddy.
“I suspect we’ll see some August gas prices that are lower than anything we’ve seen since 2010 when prices were around $2.70 a gallon,” he said. “If I had to project prices, I would say $3.50 to $3.70 a gallon for the next 40 days (and) prices in the $3.10 to $3.30 a gallon range by year’s end.”
But all it takes is a hurricane in the Gulf of Mexico or a crisis in the Middle East to radically alter price trends, he said.
Most metro Atlanta drivers recall that the aftermath of hurricanes Katrina and Rita in 2005 brought price spikes, followed by government action to cap prices and then, a shortage of gasoline.
Some consumers have made changes to soften the blow of what seems to be the new normal of $3-plus gas, buying fuel efficient vehicles, working closer to home, taking mass transit or combining various strategies.
Bernard Assaf, 40, of Johns Creek drives about seven miles from his home to a bus stop along Georgia 400. He rides the bus to a train station, rides one stop and gets off at his office near the Atlanta-Sandy Springs line.
“I wouldn’t switch back to driving alone,” he said.
In the end, all economic measures are interrelated: economic growth, jobs, stocks and gas prices, too.
Data analysis shows that over the long term, changes in gas prices have been consistent with changes in consumer moods. But it also illustrates the weakening of that tie in recent years.
An AJC comparison of data since 1990 shows gas prices and consumer attitudes moved in parallel most of the time.
Yet, the connection has largely evaporated since 2009.
One explanation could be that consumers have been more focused on other things, such a job security and stock holdings. For instance, the most-quoted piece of economic data, the unemployment rate, has shown a consistently high correlation with confidence.
But gas prices might again move to the fore.
GSU’s Dhawan says that gas prices may be a modest factor now, but if some surprise sends prices soaring, it would hurt much more now than during a time, like the 1990s, when consumer incomes were rising strongly.
“In the last five years, there’s been very little inflation, but there’s also been very little in the way of wage increases,” he said. “So if gas prices go up, it’s really going to hit hard.”
