While consumers are feeling the pain at the pump, prices are not yet at a level that would cause the economy to go into a recession.
It's not clear where that breaking point price is. It would probably be more than just gasoline that would cause the economy to go into a tailspin. If fuel prices stay high for an extended period of time, economists say a recession is possible.
The national average for a gallon of gas was $4.77 on Thursday, up 65 cents from a month ago.
Inflation this spring is running at an 8.3% pace, which is higher than last year, due to the fact that other costs are also rising. Higher energy prices are being created by surging natural gas prices.
Harrison Fells is a senior research scholar at the Center for Global Energy Policy. Many economists don't think $5 gas prices have much effect Most of us agree that high prices with no other policy intervention will be a drag on the economy. It is not certain whether or not it is enough to tip us into a recession.
The pace of the increase has been rapid. Consumers can be affected by rising fuel prices and the cost of gas.
Wages and a strong job market are helping to insulate against higher prices, according to economists. Consumers are in better shape than they were in 2008.
There is support from the healthy labor market and the amount of excess savings that are still outstanding. There was no savings in 2008.
Consumers were in debt and the household balance sheets were weak. There wasn't much savings. It was difficult to absorb price shocks.
According to Mastercard SpendingPulse, which measures overall retail sales across all payment types, nominal spending at gasoline stations in recent months has increased at a trend pace of about 30%.
The nominal spending growth remained steady even though gas prices went up. Consumers have cut back on how much gasoline they buy as they spend the same amount, according to her.
There has been a decrease in consumption. Consumers are trying to figure out how to balance their spending priorities
Vehicles are more fuel efficient and there are more hybrid and electric cars on the road. With more people working remotely or in the office, there is more flexibility in commute time.
It feels different for the average person out there if they are exposed to gas prices.
The economy is holding on, but there have been signs of a drag from gasoline prices. The month of May was a time when gasoline prices rose quickly. Large sports utility vehicle sales declined.
It's possible gas is playing a role. Demand side driven, not supply side driven. He said that the economic indicators made him most nervous.
Consumer trends are watched by economists. Consumers are taking on more debt due to the rise in credit card use. Lower and middle income households are taking out loans.
He doesn't expect a recession this year because he doesn't see gasoline at a point where it's hurting the economy.
I don't believe we're there yet. $150 for a barrel of oil is consistent with $5.50 or $6. We're done. He said we are in for a recession. It would be overwhelming. If we don't stay there long, we could eat $120.
He thinks oil will be below $100 per barrel by the year's end, which will relieve the pressure on gasoline prices.
The economy is in a state of disrepair here. He said we need a bit of luck with oil prices. He sees a one-in-three chance of a recession over the next year, and almost even odds for one in the next 24 months.
Many Americans are choosing to spend their money on travel and entertainment because of the high gasoline prices. As prices rose, the determination to return to normal activities could have kept gasoline demand higher.
The savings came out of the Pandemic. People were in a better position to deal with higher gas prices. The demand for travel together with the $5 gas price is shielding us.
While gasoline prices are at a record, they are not as high as they were in 2008.
According to Sarah House, senior economist at Wells Fargo, the average price for a gallon of gas will be $4.84 in June.
It will take more than just higher gasoline prices to cause a recession. There are still a lot of jobs we are putting up.
Consumers are dealing with some of the fastest growing inflation in decades, and gasoline just adds to that burden.
There is nothing that makes it easier for an unexpected shock to knock the economy off course. House doesn't think inflation has peaked because of uncertainty about how high energy prices can go.
The price of oil hit a high of about $130 per barrel in March, but then fell off again. As China's economy reopens after recent Covid shutdowns, crude could go up as European sanctions on Russian oil increase. The price of West Texas Intermediate crude was under $122 per barrel on Thursday.
There is less gasoline supply due to a reduction in global refining. In the US, refining capacity is down 1 million barrels a day from pre-pandemic levels.
The peak price of gasoline could be as high as $6.20 per gallon by August, but other analysts think it will be closer to $5.25 per gallon.
Patrick DeHaan said driving demand was down over the Memorial Day weekend compared to last year.
In the week leading up to the holiday weekend, drivers used 8.98 million barrels of gasoline. It was 9.2 million barrels a day last year. Drivers used almost 10 million barrels a day in the year.
All bets are off if there is a shortage of gasoline because DeHaan expects the run-up to be nearly at a peak.
We will go up to $5.50 or $6 if we get a storm. He said that a peak is more Predictive than it is this year.
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