Gas prices typically fall in late August and September, as the busy summer travel season ends and people settle into their autumn routines while the country transitions to cheaper, winter gas blends.
That isn’t happening this year. The average price of a gallon of gas has been increasing over the past month, according to AAA, and is at $4.37 per gallon nationally. That is up 7.3% over the past month, and 37% compared with the same price a year ago. Gas has never cost this much at this time of year.
It’s worse for users of diesel, which has hit a record at $6.31 per gallon. The price of a gallon of diesel is 70% higher than it was a year ago.
Unsurprisingly, this is frustrating consumers, leading to protests around the world. Consumer sentiment, according to the University of Michigan, fell 7.5% in September.
And it may be damaging restaurant industry valuations. Our equal-weighted index of 35 restaurant stocks is down 11.6% over the past month. Only two of those stocks are up during that period.
That’s far worse than the S&P 500 index, which is down 2.6% over the past month.
Driving much of this is the cost of oil, which is up 71% so far this year, and has risen 42% since July, even after easing somewhat on Wednesday. Fears about the supply of oil, thanks to a pipeline shutdown in Saudi Arabia amid an ongoing conflict in the Middle East, has caused much of the recent price hike.
Independent analysts don’t expect much relief. Traders on the prediction market Kalshi, if that is your thing, estimate there is a 71% chance of prices exceeding $4.60 per gallon before the end of the year.
Patrick De Haan, head of petroleum analysis for GasBuddy, expects price relief is “unlikely,” citing attacks on Russian oil refineries, ongoing friction between the U.S. and Iran and new hostilities in the Red Sea.
“While most of the country transitions to cheaper winter-blend gasoline this week, the scale of ongoing geopolitical escalations makes meaningful price relief unlikely in the near term,” De Haan said. “Motorists should brace for continued volatility ahead.”
Gas prices can affect restaurants on both demand and costs. Rising prices diminish consumer spending power, leading to traffic declines, particularly among lower-income consumers.
It’s tough to determine just how much higher gas prices affected restaurant spending this year, however, because lower-income consumers already were cutting back on spending.
In addition, by this point, at least in theory, consumers are now accustomed to the price of gas being higher than $4 per gallon. Yet the impact these prices could have on consumer confidence appear likely to keep a lid on industry demand. Sales at fast-food chains were down 0.6% last month, according to Revenue Management Systems.
But gas prices also affect the cost of goods. Because diesel prices are so high, operators will likely have to contend with fuel price surcharges as distributors recoup their cost of bringing ingredients to restaurants.
The bigger issue, however, is just the ongoing lack of relief on an economic problem that has plagued the industry for the past three years.
Despite an economy that is doing well, based on traditional economic indicators such as unemployment, consumers have cut back frequency at chain restaurants. Higher-than-usual gas prices will likely keep that pressure up for the foreseeable future.