This post is part of the On the Margin blog.
Don’t look now, but gas prices are going up in a big way.
The price of a gallon of gas has jumped 16 cents in the last week, and climbed 7 cents since yesterday, according to AAA.
The national average price of a gallon of regular gas on Friday averaged $2.52, according to AAA’s gas price tracker. It was $2.45 yesterday.
A year ago, the average was $2.22, working out to a jump of 13 percent.
The spike is largely due to Hurricane Harvey, which shut down oil refineries and pipelines in Texas, and is believed to be a short-term problem.
“Early reports indicate minimal to no significant damage to Corpus Christi and Houston refineries,” Jeanette Casselano, AAA spokesperson, said in a statement.
The question is whether the spike, temporary or not, will hurt restaurant sales at a time when they’re already relatively weak. The answer? Well, yes.
In reality, the spike isn’t huge right now. Consumers are spending just under $12 more a month than they did a year ago if they use 40 gallons of gas. That’s about the price of a meal at a fast-casual restaurant.
There are differences in views as to the impact of gas prices on restaurant spending. Modest fluctuations seem to have little impact, but we know that one big shift in prices did influence restaurant traffic.
According to MillerPulse, same-store sales grew from 1.6 percent in June 2014 to 5.3 percent in January 2015. The improvement coincided with a dramatic, 40-percent decline in gas prices. Consumers, flush with new cash, ate out a couple more times per month. But consumers eventually adjusted and went back to their old habits. Sales and traffic have been sluggish ever since.
Similarly, it would seem that a gas price spike would have the opposite impact, hurting sales for a time before returning to normal as consumers adjust.
All said, the current spike is nowhere near as potentially impactful as the decline in late 2014.
Gas prices also remain far below where they were from 2011 through 2014, when they were well over $3 per gallon nationally.
But videos of long lines at gas stations, and the suddenness of the increase in gas prices, can affect the consumer psyche, and they could pull back on spending automatically.
For some chains that cater to lower- and middle-class consumers, the result could be a drop in same-store sales — something the industry hardly needs at the moment.
Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.
Contact Jonathan Maze at [email protected]
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