Monday, January 2, 2017

Five graphs for 2017: #5, gas prices

 - by New Deal democrat

In the last couple of years, I have identified a few relationships that I thought were particularly worthy of being followed over the next 12 months.  Usually these have been metrics that had been at near extremes, or showed signs of approaching a turning or inflection point. 

The first such important metric for 2017 is gas prices, one of a troika that together may set the stage for the next recession.

After the "great recession," these quickly returned to nearly $4 per gallon for several years, acting like a "choke collar" on growth.  Every time the economy looked like it was taking off, gas prices would rein in other consumer spending.

In 2014 gas prices fell precipitously, to as low as about $1.69 at the beginning of 2016.  Throughout last year, it appeared gas prices (which tend to show lots of seasonality) were bottoming -- and they finally turned positive YoY late in the year, as shown in red in the graph below (actual prices per gallon are shown in blue):

Normally gas prices have had to increase 40% or more YoY to create any kind of "shock."  As of now, they are only up about 15% YoY.

I'll be keeping tabs on this metric to see if prices go up near $4/gallon again, and if they are up more than 40% YoY.