Ever-Increasing Gas Prices Squeeze Americans’ Budgets

April 23, 2008

This article is included in these additional categories:

Automotive | Retail & E-Commerce

When gasoline prices hit the forecast $4 per gallon this year, consumers will be spending about one-fifth (19%) of their weekly household budgets on gas (compared with the 2007 range of 12-16%), according to Nielsen’s Gas Monitor Report.

Frequent Trips, More Money Spent on Gas

When prices are high, consumers try to limit the amount of money they spend on each trip to the pump – so they make more trips. In 2007, they averaged 1.3 trips per week when regular gas was at its highest point in 2007 ($3.21/gallon), compared with 1.24 trips at the lowest point ($2.11/gallon).

nielsen-gas-prices-average-weekly-gas-trips-vs-price-2007.jpg

However, per-trip gas spend goes up as prices climb, as does weekly gas spend. In 2007…

  • Overall weekly gas spending increased 46% from $32.02 to $46.72 per household.
  • Per-trip spending was up 40% from $24.42 (when gas was at its lowest price) to $34.11 (when gas prices hit their peak):

nielsen-gas-prices-highest-lowest-gas-spending-per-occasion-2007.jpg

“Consumers tell us they are combining errands and trips, eating out less and doing more things at home to counterbalance rising gas prices,” said Todd Hale, SVP, Consumer & Shopper Insights, Nielsen Consumer Panel Services. “Nevertheless, the amount of money spent on gas each week is still taking a huge bite out of consumers’ budgets.”

Convenience Stores vs. Warehouse Clubs

Convenience stores (with more than 146,000 US locations) attract nine times more gas buyers than warehouse clubs or grocery stores:

nielsen-gas-prices-convenience-stores-warehouse-clubs-2007.jpg

Warehouse clubs, however, have a higher per-trip level of spending, due to more affluent consumers’ driving bigger cars (e.g., SUVs, luxury cars).

To attract and retain customers and ease gas-cost strain, businesses are offering the following incentives:

  • Lower gas prices or gas discounts based on in-store purchases – commonly found at warehouse clubs and some grocers.
  • Loyalty programs and value price offerings – popular at convenience stores, to take advantage of the frequent trips. (Convenience stores are also placing stronger focus on their food service business, capturing market share from fast-food and casual dining restaurants.)

“Today’s consumers are looking for value and convenience, and this year the impact of rising gas prices is something all retailers will need to address through assortment, pricing and promotional strategies,” said Hale.

About the report: The Nielsen Gas Monitor Report is based on consumer purchases captured via Nielsen Homescan, measuring consumers’ weekly gas buying behavior across key retail channels.

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