The low price of gas is economic stimulus for your wallet
Posted
Nov 24 2008, 09:52 PM
by
Karen Datko
Rating:
This post comes from Mark Huffman at partner blog ConsumerAffairs.com.
Talk is intensifying in Washington, D.C., about the need for an economic-stimulus package early in the Obama administration to help lift the country out of its economic plunge. But economic factors have already delivered some economic stimulus without the Treasury Department having to write a single check.
Since August, oil prices have been falling, and the price decline was speeded up by September's credit crisis. A barrel of oil has fallen from just over $147 in July to below $50 last week.
As oil has plunged, so has the price of gasoline at the pump. Motorists who had grown accustomed to spending $75 or more to fill their tanks are now doing so for $40 or less. The difference stays into their pockets.
The national average for regular gas has now dropped more than $2 per gallon since this summer, when it reached $4.11. That $2 drop roughly equals a $240 billion tax cut for consumers, economists say.
Oil speculators who bid up the price of oil in the first half of 2008 because they thought booming economies in India and China would keep demand high no longer think that way. They've been selling oil contracts since August, and some analysts predict prices could go even lower. And as oil goes lower, so does gasoline. The current national average price of unleaded regular is well below $2 a gallon.
Airfares drop
Lower fuel costs are having another beneficial impact on consumers. Airline tickets, which soared on rising jet fuel costs, are falling now that fuel costs are coming down. The average airline ticket was down nearly 5% in the last month, according to the U.S. Bureau of Labor Statistics.
Economists say food costs are still high, but that they too could ease a bit when cheaper transportation costs begin to filter through the system.
Of course, cheaper gasoline comes at a pretty steep price. The economic disruption that's pushing prices lower will also cost many people their jobs. It's already eaten away at equity in their homes and the value of their stock portfolios.
Still, economists say, it's a mitigating factor that keeps the economic pain from being even worse, and might prove helpful in eventually turning the economy around. When that happens, consumers had better be prepared to start paying $3 and $4 a gallon for gas again, because oil prices will be certain to resume their climb.
