U.S. gasoline prices are now at their lowest levels in four years, and Americans are expected to save hundreds of millions of dollars a day as a result. Drivers won’t be stashing that extra cash under the mattress; instead, they’ll be pumping it back into discount retail chains, restaurants and auto dealerships, analysts say.
Regular gasoline sold for $3.06 a gallon on average earlier this week, about 64 cents less than the average price in June, according to the U.S. Energy Information Administration. That might seem like pocket change, but the difference adds up to roughly $250 million in savings on daily fuel expenses, auto club AAA reported Friday.
Over the weekend, prices could slip below $3 a gallon for the first time since December 2010, it said.
“Many drivers are saving $10 to $20 per trip, and that money adds up,” Michael Green, an AAA spokesman, said by phone from Washington, D.C. “Lower gas prices are a boon for the economy.”
Green said that U.S. gas prices typically fall this time of year as cooler and nastier winter weather keeps more people off the roads. But the degree to which prices have slipped is largely the result of falling crude oil prices. Global crude has plunged by more than 25 percent since its peak in June, due to weak demand in Europe and China and booming supplies from the United States.
American drivers on fixed budgets or low incomes will feel the biggest boost from cheaper gas prices. “They go into a store and have a very limited amount of money they can spend,” Mary Epner, CEO of Mary Epner Retail Analysis in New York City, said.
With extra dollars in hand, budget-minded consumers might make more trips to the grocery aisles, toy departments or home goods sections of discount retailers such as Ross Stores Inc. or Wal-Mart Stores Inc., Epner said. And with the holiday season rapidly approaching–or already upon us, depending on whom you ask—shoppers will likely buy more gifts and festive decorations.
That could help propel holiday retail sales to as high as $986 billion over the November to January period, a 4.5 percent jump compared to the last season, according to a recent forecast by Deloitte, a consulting and financial services firm. Along with lower gas prices, Deloitte economists attributed the rise to income, wage and job growth, stock market gains and low debt levels.
Some of the holiday sales will also come from road-tripping Americans, who are likely to fork over more money for lodging, dining and shopping if they’re spending less on gas throughout the journey, Green of AAA said.
And drivers are increasingly likely to make the trip in an SUV. Cheaper gas is encouraging U.S. auto buyers to skip over smaller cars in favor of larger fuel-guzzling vehicles, Bloomberg News reported Friday. Sales of small crossover utility vehicles such as Jeep Cherokee and the Honda CR-V rose 14 percent this year through September, while sales of subcompact cars like the Ford Fiesta and Honda Fit dropped 2.5 percent, according to Autodata Corp. figures cited by Bloomberg.
Still, the boost from falling gasoline prices won’t likely last past winter, Green said. Oil refiners typically shut down some of their facilities in the spring for maintenance and repairs, which strains gas and diesel supplies just as the weather improves and more Americans hit the road. And if global crude oil prices bounce back from today’s levels, gasoline prices would similarly tick back up.
“The days of paying more than $3 per gallon for gas have regrettably not gone away,” Bob Darbelnet, AAA’s chief executive, said in a Friday statement.