We have no idea if gas prices are going to kill the economic momentum or not.
But we do know that we’ve seen several analysts argue that unlike the last time gas prices went through the roof, this time we’ll be OK.
Here’s a smattering of the This Time It’s Different reasoning.
Citi’s Steven Wieting notes that unlike with past spikes, gas consumption is on the downslope, and domestic oil production is on the upslope.
Barclays’ Peter Newland notes that what matters is not the price of gasoline, but the rate of growth…
Based on current futures pricing, the retail gasoline price looks set to rise to a similar high point just below $4 per gallon this year, most likely in Q2. However, the rate of energy price inflation that this implies is significantly less than in the same period last year, given the higher starting point and less rapid ascent. Indeed, current futures pricing would be consistent with around a 10% q/q (saar) increase in the gasoline component of the CPI in Q1, and a broadly sideways move in Q2. By comparison, gasoline inflation was close to 50% in Q1 2011 and prices rose a further 31% in Q2.
Goldman argues that we don’t really know if $4/gallon gas is a big deal, since we’ve only been there once before and that was a weak economy. And also, the fact that consumers have seen $4/gallon gas may take off some of the sticker shock.
Nomura’s Ellen Zentner and David Resler point out how much consumers are saving on natural gas bills right now:
Deutsche Bank’s Joe LaVorgna makes a similar point:
Total household energy consumption was $640 billion last quarter. Gasoline (motor fuel) consumption accounted for most of the spending at $391 billion or 61% of the total. Natural gas consumption is a relatively small portion of household energy spending, accounting for just $53 billion or 5% of the total. Some analysts have argued that the savings from lower natural gas prices has been relatively inconsequential and it has. According to our calculations, the current price of natural gas this quarter is likely to net households only $1 billion in energy-related savings. This is substantially less than the near $13 billion (and counting) drag that is likely to come from higher gasoline prices. However, we get the sense that investors might be overlooking the savings from less utilities spending, which has been more substantial. Unseasonably warm weather across parts of the country, in particular the Northeast, has significantly weighed on utility usage and hence spending.
Barclays also notes that all other commodities are trending lower during the gas spike.
So you feel better, right?