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.
PAGE 2 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.
