Higher Gas Prices

Key Points:

• Gas prices reaching round numbers like $5 per gallon have a strong psychological impact on consumers, making price increases feel more significant than slight variations above those thresholds.
• Historically, gas prices tend to rise quickly when oil prices go up but fall slowly when oil prices decrease, contributing to consumer frustration during price spikes.
• Despite recent spikes driven by geopolitical events, inflation-adjusted gas prices remain comparable to levels seen in 1990, and energy spending as a percentage of disposable income has been declining over time.
• Current disruptions in global oil supply, such as the closure of the Strait of Hormuz, have analysts concerned about potential further increases in gas prices, possibly reaching $6 per gallon if unresolved.
• The stock market currently appears more influenced by earnings and technological factors like AI than by energy prices, and investors are advised to focus on controllable factors like savings, asset allocation, and risk management rather than attempting to predict geopolitical or economic outcomes.