Why Gas Prices Are Such an (Economic) Drag

Are the hopes for an economic recovery disappearing into our gas tanks? On Thursday the Commerce Department reported economic growth had slowed to an annual rate of 1.8 percent. It had been projected to be as high as 4 percent.

There are many influences on that dip – from trade imbalances to reduced government spending – but it’s hard to ignore the influence of gas prices. The numbers are dramatic. A Patchwork Nation analysis of data from GasBuddy, finds prices are up over a dollar-a-gallon compared to last year in some places – and, as is usually the case, pain has not been spread evenly.

To be clear no one has been spared a hit at the pump, but some types of counties – like the sparsely populated Mormon Outposts in the Mountain West – have seen much smaller bumps than others. And as one might expect, the big city Industrial Metropolis counties, not only have the highest prices overall, sitting just shy of $4 a gallon, they also have seen the biggest increase. A gallon of gas is more than a dollar more than it was in April 2010.

How does that translate into economic pain exactly? Directly and indirectly. A recent analysis form Deutsche Bank finds that every penny increase in average gas prices at the pump in the United States equals $1.4 billion siphoned out of the US economy.

But a lot of the real pain depends on where you live, what stage of the “recovery” your community is experiencing and your driving habits.

The Differences

The increase in gas prices has swamped the country, sparing no one. The bumps in most of our 12 county types are pretty uniform – between 92 cents and $1.01. The Mormon Outposts overall have managed well, with an increase of only 55 cents a gallon from last year.

Click on each bar in the chart above to see average gas prices in that county.

But there are some differences in what gas actually costs today because there are differences in what those communities usually pay. So, on average, gas in less-wealthy Minority Central counties is 20 cents-a-gallon cheaper than it is in the Monied Burbs. And the people who live in and around the nation’s biggest cities – the Industrial Metropolis counties – pay the most of all.

Understanding the pain, however, is not that simple, because in the end what you pay for gas is only a part (sometimes a small part) of your actual gas bill and of rising prices. Among other things, taxes play a role, as well as the formula blends required in your area.

There are also bigger questions about what kind of car you drive and how long your commute is. No one likes $4-a-gallon gas, but it helps if you only have to fill up every other week, or even live car-less, as you might be more likely to do in a dense urban area.

And, of course, there is how much disposable income you have. Are you diverting money into your gas tank that was supposed to be going to your family vacation to London or that was supposed to be going to your grocery bill? That makes a difference in what the gas price hike means.