Thoughts on Gas Prices

Rising, but how far?

Gas prices have risen pretty sharply over the past couple weeks, up about $0.32/gallon since the start of July. In nominal terms (not adjusted for inflation), a gallon of gas costs about $1.40 more than it did at the start of the pandemic. For someone with a 14-gallon gas tank, it currently costs about $20 more to fill up than it did in early-2020.

But wages have risen over that span too, and a good way to think about gas prices is in terms of how long the average consumer must work to fill their tank. Since 2006, it has required an average of 101 minutes of work to fill up. While we’re still below that level at 98 minutes, that’s up quite a bit from 85 minutes back in December 2022.

So gas isn’t too expensive in relative terms right now, but prices are higher than over most of the past decade and rising rapidly.

Why is that important?

1. Gas prices are the most visible prices, both literally (posted on giant signs) and figuratively (most people drive), and they go a long way toward shaping consumer sentiment.