Will Gas Prices Undermine The Recovery Of Restaurant Sales?

One of the key influences on restaurant sales is gasoline prices. When they increase or particularly spike sharply upward, restaurant sales almost always suffer. So, on the heels of the tough winter’s negative effect on sales and traffic and the sharp rebound of sales and traffic in April and May, many are concerned with the impact the recent crisis in Iraq may have on gas prices and the restaurant market.

While the turmoil in the Middle East has pushed prices up moderately, the impact has not been as pronounced as one might expect. As of June 23, the average price for a gallon of regular gasoline in the U.S. stood at $3.683. This is 10 cents more than a year ago, but only 3.4 cents more than a month ago, according to AAA’s Daily Fuel Gauge Report. AAA already had forecast that prices would be moderately higher this year—averaging in the $3.55-$3.70 range—given higher crude oil prices driven in part by the Ukraine situation. The key impact may be that prices don’t fall in June and early July as they often do once the summer blend conversion takes place.

It may be too early to determine the impact of gasoline prices on the market yet. While the uncertainty in Iraq, the second largest supplier to OPEC, is roiling the market, in fact most of Iraq’s production comes from wells in the south of the country that are unaffected by the current situation. We’ll have to see how the situation plays out, but for now, the moderate increases don’t appear severe enough to affect the foodservice market in any meaningful way.