Gas Price Increases Could Dampen Consumer Optimism

ALEXANDRIA, Va. – Consumer confidence heading into the third quarter of 2013 is higher than it has been all year, but that level of optimism may not be sustainable, given that consumer sentiment typically closely tracks gas prices, which spiked to 16-month highs over the past two weeks, according to the most recent monthly NACS Consumer Fuels Survey.

Consumer optimism regarding the economy was at the highest level recorded this year as Q3 2013 began on July 1, with 48 percent of consumers expressing optimism vs. 52 percent expressing pessimism, according to NACS, the Association for Convenience & Fuel Retailing. A whopping 86 percent of consumers stated that gas prices impacted their feelings about the economy in July.

The national consumer survey was conducted July 12-14, when data from the Oil Price Information Service showed that national gas priced averaged under $3.50 per gallon. More than 1,200 gas consumers participated in the survey.

"Gas prices play a big role in defining consumer sentiment and that continued in July," said NACS Vice President of Government Relations John Eichberger. "For the past seven months, consumer sentiment has risen or fallen along with gas prices, and consumers were clearly in a good mood as July began. However, the steep increase over the past few weeks is a strong indicator that we could see a spike in pessimism in August and it is something that we will closely monitor in our next survey."

Despite the increased optimism, 64 percent of consumers said they expected gas prices to increase over the next 30 days.

The survey also explored the question of when gas would become so expensive that consumers would try to reduce the amount of driving they do. On average, consumers said they would drive less at $4.11 per gallon, which is also the record national average gas price from July 2008, according to NACS.

Consumers also stated that gas prices would have to reach an average of nearly $5 per gallon before they would drive drastically less or seek out an alternative to driving. The mean price cited was $4.93 per gallon.

"While the second half of the year began with much promise, retailers in all channels may be in for a bumpy ride over the coming weeks," Eichberger said. "This may be particularly acute for fuels retailers who squeeze margins to fight for customer traffic when gas prices rise."