Research Shows March Fuel Demand up Slightly Despite Rapid Price Increases
An economist with the Upside app, which offers consumers cash back on gasoline, groceries and dining, said U.S. fuel volumes sold rose slightly in March, , even as prices shot higher on the continuing conflict in the Middle East.
While Upside said it expected a decline in fuel demand, its data suggests a 1.6% month-to-month increase in daily gasoline sales volume.
OPIS data show a 1.3% month-to-month increase in March fuel demand. But March volume is down 5.6% from last year.
“When prices spike, consumers don’t behave all that differently,” said Tom Weinandy, a research economist with Upside, wrote Monday in a social media post.
“Fuel has a very low price elasticity. That means it takes a massive price increase to convince people to keep their cars parked,” Weinandy added.
He said fuel’s price elasticity is about 0.1%. With Upside’s data showing a 29% gasoline price increase in the first few weeks of March, he said he’d normally expect a 3% decline in demand.
“The reality is that people still need to commute to work, drop their kids off at school and live their daily lives. Instead of pushing most consumers to keep their cars at home, high gas prices usually shift behavior in other ways, like more frequent and smaller fill-ups,” Weinandy said.
In a recent call with analysts, Alex Miller, Alimentation Couche-Tard’s chief executive officer, made a similar observation. The large global fuel retailer said that when fuel prices are high, consumers tend to make smaller purchases but visit stores more frequently.
“As the price goes up, average unit purchase comes down. It doesn’t necessarily mean demand destruction and it actually drives additional trips to our sites,” Miller said. “I don’t know that we have an exact dollar amount that we say demand destruction occurs. A lot of driving is obviously needed or is something that consumers must do. Clearly, when we get over $4, up to $5 a gallon, that puts additional stress on consumers that are already stretched.”
Research firm Morning Consult’s economic data show consumer sentiment dropping sharply.
“Sentiment captures how consumers feel, but it doesn’t always predict how they spend,” Nick Laughlin, vice president of content for research firm Morning Consult, said in a report this week.
Weaknesses in the economy could eventually have a greater impact on consumer demand. But Laughlin said that so far consumers aren’t treating sticker shock at the pump as the start of a broader inflationary spiral.
“The contrast with the last gas price shock is instructive. In 2022, the labor market was historically tight, and consumers could lean on rising incomes to sustain spending. In 2026, the cushion is thin. If consumers cannot earn their way through this shock, they will have to cut their way through it,” he said.
Recent data, however, shows a steady decline in pay loss rates across all income brackets over the past four weeks.
“This could signal a stabilizing labor market, providing a path for the economy to navigate through the war without falling into a supply-shock driven recession,” Laughlin said.
Reporting by Donna Harris, dharris@opisnet.com