Effect of Gasoline Prices on Retail Food

Prices in U.S. Cities

Sawyer A. Harris
Fall 2014

Abstract
Retail food, or food purchased by consumers for off-premise consumption, must be shipped across the
nation and even world from farms to marketplaces. Foods may travel thousands of miles before
reaching consumers, often carried by trucks which must consume fuel. It follows that the price of fuel
should be directly related to the price of foods being transported. Gasoline prices may serve as a proxy
for truck diesel fuel and act as a general indicator of transportation costs, considering that both fuel
types are derived from crude oil. Using monthly average prices for gasoline and various foods in U.S.
cities, we test for correlation between these economic variables. Preliminary estimates suggest that, on
average, a $1 increase in gas prices predicts a $0.25 to $0.75 increase in food prices, depending on the
category and organization of different foods.