What is the relationship between retail gasoline prices and the volume of gasoline sales? The first chart below shows the monthly data for U.S. Prime Supplier Sales Volumes, courtesy of the Depart of Energy’s Energy Information Administration. The numbers are updated monthly with about a two month lag. The numbers are highly volatile and have some seasonality, so I’ve added a 12-month moving average to facilitate our understanding.
The next chart includes an overlay of monthly retail gasoline prices, all grades and formulations. The retail prices are updated weekly, so the price series is the more current of the two.
As we would expect, the rapid rise in gasoline prices in 2008 was accompanied by a significant drop in sales volume. With the official end of the recession in June 2009, sales reversed direction … slightly. But the 12-month MA of volume for the latest month (February 2011) is still about 6.3% below the pre-recession level. The full impact of the sharp rise in gasoline prices since last September has yet to be seen in sales volumes because of the 2-month lag. But the average of daily sales for February 2011 was the lowest February number in eleven years.
Some of the shrinkage in sales can be attributed to more fuel-efficient cars. But that presumably would be minor over shorter time frames and would be more than offset by population growth, more cars on the road, and more miles driven, the later tracked monthly at Calculated Risk.
The next chart adjusts the 12-month MA of sales volume for population growth based on the monthly Civilian Non-Institutional Population data from the Bureau of Labor Statistics, via the St. Louis (FRED repository. What we see here is that gasoline sales volume, on a per-capita basis, peaked in September 2009. In fact, our per-capita consumption of gasoline is fractionally lower (-0.4%) than it was at the end of the Great Recession.
What does this analysis suggest about the state of the economy? From an official standpoint, the Great Recession ended 22 months ago. But if we want confirmation that the economy is in recovery, gasoline sales is the wrong place to look.
Doug Short PhD. is the author of dshort.com.