Now That Gas Prices Are Lower, You Have Money To Buy Stuff, Save
Even though real incomes are dropping and people are worrying about their jobs — a drop in gas prices has lead to a push in retail spending, says the New York Times.
Consumer spending rose in 0.6% in November — its largest gain in 2 years.
“The declines in gasoline prices have been extremely large, larger than anything we’ve seen in the past,” said Dean Maki, chief United States economist at Barclay’s Capital. “That’s providing a lot of spending power to households.”
Gasoline prices have plunged to $1.66 a gallon from their July peak of $4.11 as Americans drove less, construction projects were halted and the global appetite for oil waned in the economic slowdown. Filling up a 15-gallon tank now costs about $25, compared with $60 this summer.
“It’s a very substantial amount of money that’s been freed up,” said Abiel Reinhart, North American economist at JPMorgan Chase. “That’s a definite positive for consumers. It’s probably the only positive at this point.”
The good news from a personal finance standpoint is that you're not just spending all the money you're saving on gas. The Commerce Department reported that the personal savings rate increased by 1% in November.
Drop in Gas Prices Offers a Bit of Relief for Consumers [NYT]
(Photo: C. Barr )
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Comments:
This is a baby step. If this article was about home prices rather than gas, that would be very encouraging.
For some reason, sellers and banks still feel their houses are made out of gold and aren't dropping the price fast enough for them to sell.
I filled up my gas tank twice this summer That's a savings of, at most, $70 (more like $50-60 for me, because I only have an 11 or 12 gallon tank). That's hardly going to spur me on to sudden, frivolous spending.
The problem is that all of the prices that were raised due to gas prices are still raised, and I doubt they will come down.
It's wierd how that works...
Get back with me when grocery prices drop.
Oh... that's right. They won't.
Never mind.
I read the title of this article differently.
"Now that gas prices are lower, you have money to buy stuff. Save"
Implying that despite the fact that prices have dropped, you should still save your money and not keep buying crap you don't need.
I figure that between my wife and I, we are saving at least $110 per month. And where is that going? Towards debt of course! It's like getting a raise at work. I learned to live without that extra money, so why whould I spend it on crap.
I don't have a car
@sir_eccles: (slow clap)
I will say that gas prices cratering has actually helped me save, in that my last mileage check went entirely towards... erm, replenishing the money I'd set aside for savings and just spent... I think I might be doing it wrong.
@sir_eccles: Im car less too. Walk to work. Walk home for lunch. Once you get equipped for the weather, why bother with all that mess.
@TecmoTech: The housing situation is ridiculous. We've got a few homes in my neighborhood listed at prices that wouldn't have sold at the height of the over-valuation of home prices, much less now. It completely boggles me.
@TecmoTech: I feel the same, house prices here in NYC is still crazy high. Even little shacks cost upwards of $500k.
Is there anyone out there that legitimately believes that these gas prices will stay where they are for more than about six months?
The genie is out of the bottle--we've demonstrated that the market will tolerate $4.00+ per gallon gas. Soon enough it will rise to near that point again and hold, just as all the previous gas increases have over the years.
I love the lower gas prices. Now I'm back to under $20 per fill up. Yay!
Would be nice if the unemployed 9% in Michigan had a job to drive to.
@tinmanx:
Encouraging sign for you guys: we just lowballed a nice home in Las Vegas and it was accepted. Hopefully I just wrecked the neighborhood pricing and now regular people will be able to afford houses.
Start the lowball revolution in your area!
@ophmarketing: It shouldn't have to be said, but you are by no means typical in the amount of fuel you use.
@GorillaEmperorOfEarth: Bravo...and just imagine how much extra cash you'll have when that debt is gone!
@sir_eccles: Please go stimulate the economy by purchasing an upgraded shifter, racing tights, granola, or whatever weird crap you buy.
Actually, real income has been increasing -- for those lucky enough to be employed, anyway. So says economist Dean Baker. [www.guardian.co.uk]
@diamondmaster1: Would you really consider the decrease in time spent driving tolerating it? I agree that it will go back up, and will probably settle at a higher rate than before, but I wouldn't say that everyone just bent over and took it.
The problem I see is that when gas prices skyrocketed, everybody jacked up their prices as well. This includes restaurants, boutiques, pretty much anyone that could get away with attributing gas towards overall costs.
Now that gas is dropping in huge way, I have yet to see anyone start reducing prices. This has kept me from going out and spending my "extra income" for their benefit. Instead, I've done like a lot of people and started putting more heavily into savings.
@Tiber: What 'decrease in time spent driving'?
My drives are the same as they ever were--so, it appears, are the commutes of most other folks. They needed gas for them, and were bent over and taking it as they had no choice.
now that gas is cheaper we're using the money we would normally be using on gas and buying etf oil funds for the inevitable climb back up.
Tolerate it? How do you figure?
I didn't tolerate it and went to walking this year. Now I put the $50 I spent in gas one time a month in my pocket.
So long big oil! I don't need you!!
See, the thing is, sure gas prices have returned to normal, but I wouldn't say that wages have increased much over the last 4 years. So people who were tight on money in July *might* not have to worry about putting gas in their cars anymore, but money is just as tight.
I don't get off where people think that all this money just suddenly appeared because gas is "normal" again.
@Oranges w/ Cheese: Shhh....you'll scare people from being good consumers and buying high priced junk again.
Earnings are actually down, but it sure helps that oil is back to 1997 cost levels. How long do you actually think that will last? I doubt we'll see 150 dollars a barrel anytime soon, but I can't imagine people out there realistically think oil is going to stay at 30 dollars a barrel for any length of time. Deflation is the only thing keeping oil down, and no one wants that to continue much longer.
@PinkBox:
Yeah. I don't have any money at all!
Except yesterday, I went into the file room to file and when I came out, there was a $50 Walmart gift card on my chair. It said, "To [Me], From Santa." No one seems to know how it got there.
Wheeee!
@david_consumerist: Too bad most of the US isn't like you. The way our cities and outlying suburbs are built demand most citizens make significant commutes daily. Public transit in most outlying suburbs is sorely lacking, and those that actually have it are likely to be expensive, inconvenient and inconsistent. Hence the "need" for gas.
@pinkpuppet: There are houses like that here too. The reason most of them are so high is that is what people owe on the house (after buying with no money down and then taking money out of over-inflated values to buy homes). People won't take a loss themselves, they expect the bank to do it for them.
@milqtost: Er.. taking money out of over-inflated values to buy TOYS, not homes. All I want for Xmas is an edit button!
50 mpg.. say what you will.. I save more no matter what.. neener neener neener...
@ophmarketing: Twice this summer? I fill mine once a week and I only drive 15 miles one way to work (30 miles round trip to work).
What I'm saving on gasoline has been more than wiped out by the increase in the cost of food.
Please, I hope that there enough people to see through the transparent ploy this has been.
Oil Dropped because it was time to drop it. Oil is also used to make consumables. Christmas is a major buying time. It went down last year at this time too. They manipulate the prices with EVERY holiday and season. Any time it reaches a 'magic point' you will know because it hovers there for a longer period and once it crosses LOOK OUT!
I figure in Feb-march we will see a steady run back to about 2.80-3.33 per gallon with a high in the summer of around 4$ per gallon. The only drop that we actually saw in drivers were the ones that were priced out of the market. Jets are still flying, we all have to go to work and we still buy all the cool things oil makes.
Its a sad thing but unless we either fill the hell out of the SPR while its cheap (why arent we pouring the oil in right now anyway?) and begin pulling our OWN oil resources its going to be this way for a VERY long time.
The one positive is Venezuala has lost its wallet.
@david_consumerist: What I observed was that people responded to $4 gas by not buying SUVs to the point where the Detroit Three are on the brink of oblivion, driving less to the point of starving the vacation spots we once enjoyed very much, combining trips, and so on, to include turning down thermostats and wearing sweaters (yes, I would say Jimmy Carter has been vindicated by now), turning off lights that aren't needed, and still paying more for energy than we did a year or two years ago. I hardly call that tolerance.
@vdragonmpc: The US reached its oil peak in 1970 and production has been declining ever since. Where do you propose we find all this oil we'd need to DOUBLE our output for any appreciable length of time?
Well, I've read most of the comments and have to say I'm not really saving on anything except Gasoline as of today. Not really saving anything on Gasoline if I stop to think about it, because I almost went in the hole when it was so high and I haven't really rallied from it yet. Grocery prices have not come down. My electric bill went from $60.00 to $172.00. A person that reads the meters told me IU was paying for all the Christmas lights all over the County! I do not have central heating and air, I only have one heater and that's all we use. We are hardly ever at home except late evening and week-ends so something has to be going on for the electric to go up so drastically! I can't even save any money because of all the increases in everything else. Gasoline is the least of my worries.
truthfully saudi arabia has a brand new oil field coming on line toward end of 2009 mid 2010, capable of producing 22 miillion barrells of oil per day.
the field is almost finished, and ready to start producing, so the whole this price drop is temporary arguement is bogus and based on false info
Its not that bad. We can stop saying "20 years and its not worth it" about the Alaskan oil, Begin the harvesting of the colorado/dakotas tar sands, hit that huge oil stash we seem to be avoiding in the gulf of mexico, begin uncapping the wells we have in Texas and other states.
Its a short list but there are more options along with those.
The saddest thing is that all the eviro-screamers that want us to never drill in the gulf are only denying Americans access. Other countries are happily dunking straws in the Gulf and will be pulling out what they need while we watch hindered by a few 'citizens'.
Oh and nothing is stopping us from filling the SPR.
@diamondmaster1: I definitley didn't tolerate it either. I started taking public transportation to work, in LA no less [gasp!].
I quit driving A LOT when it was costing $50 to fill the tank. The bus became a very good option and from that i realized its a lot nicer to take public transport most of the time in LA. If I'm going to be sitting in traffic I might as well be reading a book, not staring at the car in front of me.
It would be nice if it worked that way. A lot of people didn't have extra cash laying around to spend on gas when it went through the roof. I commute to work in a car that gets 36 mpg and my gas bill was well over $300.00 bucks a month for a while. I am still in the recovery phase of that. Its a bit ironic though that I bought a home about an hour away from work because home prices were cheaper here. Next thing you know gas goes up. I guess you pay the price either way sometimes.
@Chris Thompson: Thank you. You appear to be the only person here to actually understand what I wrote.
Except that the same people that the gas prices hurt back in July are probably still paying for that increase.