Out of Control Policy Blog

Gas prices and the family budget

Lots of articles are being published about how rising gas prices are resulting in "fundamental" shifts in travel behavior and decisions on where to live. One of the more recent articles (an AP story) can be found here.

But consider this: The U.S. Bureau of the Census estimated that the average consumer household spends about 3.4% of its budget on gasoline and motor oil in 2005.

The average price of a gallon of unleaded regulor gasoline at the pump was $2.29 in 2005. That price increased to about $3.44 by April 2008 according to the US Department of Energy, an increase of 54%. Thus, by 2008, the average consumer household was spending $3,000 on gas & motor oil, or 5.1% (assuming household spending also has not changed).

This is hardly enough of a change to generate major shifts in consumer behavior, even though gas prices influence spending on the margin. The costs of moving would swamp any savings in travel for the vast majority of households, let alone the changes in the quality of life the move implies.

Samuel Staley is Research Fellow


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