Gas Expenditures as a Percent of PCE

Gas has become a hot topic of late. We can partially thank Iran for it, but we can also thank the decent economic data (demand) that has come out of Asia and the United States over the past 2 months. While my thoughts have been clear, that the Federal Reserve ($FED) cannot create demand-driven inflation (and can only really boost inflation-expectations in the short term), the one thing that does worry me about inflation is oil and a spike in gas prices. We saw how badly that could hurt the economy back in late 70s and early 80s, especially with high unemployment which would set us up for a very bad stagflationary environment. (Josh over at The Reformed Broker had a great piece that is a must read.)

So, Will we see $4.50 a gallon by Memorial day? That could really hurt the economy. This rise in price is also in spite of falling demand. Gas also sure has gotten expensive in terms of the S&P 500.

To make the picture a bit more clear, I decided to see what gas expenditures looked like as a percent of  Personal Consumption Expenditures (PCE). This shows how much percent of American’s expenses goes towards gas. While we are definitely not in the high range, we are definitely not where we can be. This should easily be in the lows 3.00s.

But its not, and in fact, we are above the average (3.79%) since 1959 as the 2011 Q4 registered a 3.9% reading. I am sure this has edged closer to 4.0% lately as gas and oil prices hit multi-month highs.

 

Gas Expenditures as a Percent of PCE (quarterly chart)

Data courtesy of BLS (Table 2.3.5U)

 

Here’s a similar chart (slightly outdated), courtesy of Econbrowser. This is energy expenditures as a percent of PCE. Looks very similar to the chart above.

 

Clearly, the trend has been up since the recession ended. Hard to see this not get back up to the levels near 2008 if the supply shortages continue as demand pents up. The US really needs to find new energy solutions before it is too late.

Update (03/06/2012):
Courtesy of EconBrowser again, here’s an updated chart of the Energy Expenditures as a % of Consumer Spending. Looks like energy costs are dropping even though Gas costs are rising.

 

 

 Tags: $UGA $RB_F $CL_F $USO $NBZ_F $BNO $UCO $SCO

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