The average price for a gallon of gas has risen pretty steadily throughout 2018. In fact, at $2.81 per gallon, the national gas price average comes in at $0.45 higher than it was on May 7 a year ago.
In many markets, including the entire west coast of the United States, prices have already topped $3 per gallon. The good news is that with the summer driving season looming, some relief may be on the horizon.
"If this past week's moderate increases are any indicator of what's to come, the fast rate at which gas prices were increasing may be slowing down," said AAA spokesperson Jeanette Casselano in a press release. "On the week, the national average held steady and 19 state averages remained flat or saw decreases in gas prices. Despite this stability, drivers on the West Coast and in Idaho, Utah, and Pennsylvania are paying $3 a gallon."
A trickle-down impact
Gas prices don't just impact you when you fill up your tank. That's, of course, the most obvious way, but pricier gas trickles down into increased costs for shipping and transporting items which generally get passed on to consumers.
The AAA prediction that gas price increases should slow down and even reverse is in line with forecasts from the U.S. Energy Information Administration (EIA). The EIA predicted that the price of a gallon of gas will average $2.74 for the period between April and September, up from a $2.41 average in 2017. In addition, the independent agency expects that a gallon of gas will average $2.64 for the full year.
This suggests that relief -- at least a mild pullback -- is on its way. Still, the EIA statistics, if they come true, mean that the average American household will spend $190 more on gas in 2018 than they did the previous year.
When to worry
Gas prices hovering around $3 may not have a major impact on consumer behavior, but if they get above $4, that will change, according to a three-year study as to how gas prices impacted grocery purchases. The paper "Mental Accounting and Consumer Choice: Evidence from Commodity Price Shocks," authored by Brown University economist Justine Hastings and Chicago Booth School of Business' Jesse Shapiro, showed major changes when gas prices rose from $2 a gallon to $4.
According to the researchers, a $2 per gallon rise in gas caused most people to spend much less on grocery purchases as if the increase in gasoline prices had suddenly rendered them much poorer.
Gas prices tie directly to the cost of a barrel of oil and global events can impact that. A slowdown in production or an unexpected war could quickly impact supply and send prices higher.
It appears that gas prices will remain higher than last year, but still around or below $3 for much of the country as Memorial Day approaches. That's good news for all of the retailers, hotels, restaurants and other businesses that benefit from people traveling. And for consumers, while costs are up from last year, they are likely not up by enough to force most people to cut back, and if these forecasts come true, they likely won't get there this year.