Drivers are angry with Biden. And Powell?

I normally visit the gas station in a runaway state, blocking out all sensory information. But even I have noticed two things lately. One is round number readings on the pump display, indicating that the previous customer was aiming for a dollar amount rather than filling up (hats off to Dan Pickering of Pickering Energy Partners for that one). The second is a proliferation of funny little stickers on pumps depicting President Joe saying “I did that!” and pointing his finger at the price window.

Both talk about the pain caused by $5 gasoline and the blame that hangs on US presidents for any price increases. But drivers also might not feel too warm and fuzzy about another official close to the White House: Federal Reserve Chairman Jerome Powell.

In June, average pump prices topped $5 a gallon for the first time ever. For a typical Ford F-150 truck — the top-selling vehicle in the United States — that means paying around $130 every time you fill up (more like $150 in California). Fuel expenditure as a share of disposable income, at around 2.5%, has returned to its end-2014 level. Yet this share remains lower than in previous energy crises. And the recent drop in oil prices, if it lasts, should offer some relief. Already, the American Automobile Association’s average daily price has fallen from over $5 to under $4.80.

Gasoline is the most visible driving cost, but not the highest. Vehicle prices have surged, largely due to the pandemic’s blows to supply chains. Based on income and expenditure data from the Bureau of Economic Analysis, the overall cost of purchasing vehicles and the parts and fuel to operate them has increased to about 6.5% of the disposable income, a level last seen at the end of 2013.

This is where Powell comes in – because another significant, albeit less significant, cost has also just crossed level “five”.

These are two sides of the same coin, of course, as the inflationary impulse flowing through gas pumps and dealer lots (and more) engenders a response from the Fed and bond markets. For drivers, a combination of rising vehicle prices and the cost of borrowing to pay for them means a bigger monthly impact. Since January 2021, when Biden took office, the implied average payment on a 72-month loan for a new vehicle has grown from around $520 to nearly $600, by my calculations. (1) Now add the cost of gas for an average driver about 1,000 miles per month, and the overall cost of owning and refueling a new vehicle has gone from about $600 per month to nearly of $800.(2) Of this increase, 40% relates to the reimbursement of the loan rather than the price at the pump .

At the high end, the combined monthly loan and fuel payments jumped into four figures. In early 2021, a typical Ford F-150, for example, might have cost you around $800 per month; today you would have $1,050.(3)

Oddly enough, despite those anecdotal signs around the gas pump, we’ve yet to see drivers backing off en masse or switching to smaller models. Trucks and SUVs accounted for 78% of new vehicle sales in June, in line with May and slightly higher than June of last year. Overall vehicle sales are down, but high prices – including dealer abuse – scarcity of inventory and large back orders suggest limited supply is a bigger problem than the slump demand. Higher tariffs are also a problem for electric vehicles; although they are cheaper to power, they cost more to buy.(4)

And yet, given these figures for the share of disposable income, it may not be so strange. We are in a strange moment, rebounding from a once-in-a-century pandemic while absorbing a generational shift in the direction of inflation and interest rates, combined with a geopolitical energy shock to the world. former courtesy of the Kremlin. Unemployment is below 4%, but our attention is absorbed by $5 gas.

The simultaneous increase in the cost of gasoline and car ownership, however, seems unsustainable. The Fed’s ultimate goal is for higher interest rates to drive vehicle prices down, or at least slow their ascent, as well as dampen our seemingly innate enthusiasm for gasoline.

The recent drop in prices at the pump, bloated inventories at retailers and the easing of inflation bets in the bond market give hope that the Fed’s offensive will be brief. On the other hand, the economic fluctuations of the past 18 months have taken many pundits off guard, and Russia’s war, affecting everything from gasoline to grain, continues. Automakers could still see their supply shortage turn into a demand gap – manifesting less in a further drop in the number of vehicles sold and more in a relaunch of deep discounts to displace them. Nor is the cure for the high cost of driving likely to win the gratitude of drivers.

More other Bloomberg Opinion writers:

• Housing impedes September Fed pivot: Jonathan Levin

• Soaring gas prices aren’t as painful as they look: Robert Burgess

• Markets signal Pyrrhic inflation victory: John Authers

(1) This assumes a 72 month loan with a 20% down payment, using the average monthly retail price typically fitted according to Average loan rates according to

(2) Assumes average vehicle miles traveled per vehicle using Federal Highway Administration data. Vehicle-kilometres traveled data, seasonally adjusted, to April 2022; May and June data are calculated using the previous year’s data for those months plus 2%, consistent with the growth seen in March and April. Number of vehicle fleets according to 2020 data (latest year available). Average annual fuel consumption data provided by the Environmental Protection Agency through 2021, which I am extending through the first half of 2022.

(3) This assumes a 72 month loan with a 20% down payment at average rates of 4.21% and 5.25% in January 2021 and June 2022, respectively. Typically equipped retail price for a Ford F-150 truck in January 2021 of $55,726 and in May 2022 (last month available) of $64,025, according to data from Gasoline prices of $2.42 per gallon in January 2021 and $4.80 currently. Assumes an average of 22 miles per gallon and 1,000 miles driven per month.

(4) A Ford F-150 Lightning rated at 1.7 miles per kilowatt-hour costs about $62 to bill at average residential electricity rates for someone driving 1,000 miles per month. That’s less than a third of the monthly gas cost for a regular F-150 getting 22 miles per gallon at today’s prices. On the other hand, a reasonably well-equipped Lariat version of the Lightning will set you back over $70,000, assuming you can find one.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Heard on the Street section of the Wall Street Journal and a reporter for the Lex section of the Financial Times.

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