The Bureau of Labor Statistics has released the 2013 Consumer Expenditure Survey
, an important resource which sheds important light on the burden of gasoline prices on American consumers.
There is some good news. Oil spending—as percentage of GDP, as a percentage of household income, and in absolute terms for households and businesses—hasn’t continued its astronomical rise. Domestic oil production enabled oil prices to remain relatively flat through 2013, despite various disruptions in oil output from Iraq, Iran, Libya, and Nigeria.
But that doesn’t mean that it’s not worth examining the burden of gasoline prices on American households. In 2002, roughly 3 percent of total consumer expenditures in the United States went to gasoline—a number that has risen to and stayed at over five percent since 2011, no small sum. For context, Americans spend more on gasoline than they do on entertainment, clothing, and electricity. Furthermore, it’s well documented that consumer purchasing behavior is strongly influenced by gasoline prices—when gas prices rise and motorists have no alternative forms of transportation, they are forced to restrict their spending on other goods and services, generating a ripple effect through the rest of the economy. A 2013 survey from Prosper Insight and Analytics
found that 70-84 percent of consumers reported that gas prices had an impact on their other purchasing decisions, and when gas prices were higher (closer to $4 per gallon), still higher percentages stated their spending was influenced by the price of gasoline.
Furthermore, while the average household spends around four percent of their income on gasoline, the burden is far, far greater on the country’s poorer demographics. For the lowest earning quintile of the American population, gasoline consumes more than 12 percent of income. Despite all the promise of the oil boom, for most Americans, its economic benefits remain an abstract concept in the absence of relief at the gas station.
And there’re more bad news. As a society, we still spend an astronomical amount of money on oil.
First, let’s look at GDP. The United States dedicates nearly six percent of GDP to spending on oil and petroleum fuels. Oil spending as a percentage of GDP has hovered around this level for decades. The lowest level ever reached was in the mid-1990s, when oil’s share of GDP was below 3 percent, but since oil prices began their run-up in the early 2000s, those days are long gone.
The good news is that the economy has become steadily less oil intense over time. Oil intensity is a measure of how many barrels of oil are consumed for every $1,000 of real GDP. Right now, Americans consume about half a barrel of oil for every $1,000 of GDP–a massive amount in a $15.7 trillion economy. While oil demand no longer rises in lock-step with GDP
, the growth of the two economic indicators is still correlated. The current oil intensity of the U.S. economy is less than half of what it was in the 1970s, when 1.2 barrels of oil was needed per $1,000 of GDP, but is still twice as high as those of the United Kingdom and Japan.
Ultimately, while it’s easy to get caught up in the current hoopla that some edge has been taken off oil and gas prices, we remain massively limited by our reliance on petroleum fuels. The real test will be how the economy fares when prices (inevitably) spike again.