Personal Finance Genius
  • Home
  • Personal Finance Tips
  • Contact

The Implications of Lower Gas Prices

11/2/2014

0 Comments

 
Picture
With the average gasoline cost below $3/gallon, consumers can enjoy more money in their pockets.
The average price of gasoline has just fallen below $3 per gallon for the first time in four years. South Carolina and Tennessee are tied for lowest fuel costs, with an average of $2.75 per gallon. Virginia comes in close second at $2.78.

Even still, there’s optimism that gas prices will drop even further. Price is determined with basic economics – the demand for gasoline is relatively stable, but the supply is increasing. US output alone has increased 70% since 2008.

 What will these lower prices mean for the American economy?

For starters, gas prices typically decline in the fall but this year the fall has been exceptional. Last year’s average was around $3.50 per gallon, meaning the drop below $3.00 will save the typical American household around $50 a month. Shippers, airlines and delivery companies will enjoy boosted profits from the lower fuel costs. Retailers are hopeful that the savings at the pump will translate into increased spending as we near the holiday season. (This is something to think about if you’re investing in these stores!)

Due to the drop in oil prices, falling 25% since mid-June, savings for winter heat could total hundreds of dollars, especially in the northeast. This gives the average American household much more breathing room. According to Bank of America Merrill Lynch, families with income below $50,000 spent 21.4% of their income on energy.

In a nutshell, a drop in energy prices adds spending power to the consumer. However, consumers should be cautious with where they spend their dollars. People have a tendency to perform “mental accounting”, or subconsciously compartmentalizing spending into categories. If one usually spends $50 per fill-up and now only pays $40, he/she will place the extra $10 into a “discretionary” income category rather than save it.

Although Personal Finance Genius is definitely biased towards saving money, any savings at the pump should be placed promptly into a savings account. 

Related Posts Plugin for WordPress, Blogger...
0 Comments



Leave a Reply.

    Archives

    August 2020
    January 2017
    November 2016
    October 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014

DISCLAIMER: Advice and information provided on this site is general advice only. Past performance is not indicative of future performance. Before making financial decisions, seek proper financial advice. By using this site, you agree that PersonalFinanceGenius.com shall not be liable for any loss or damage whatsoever out of or in connection with any use or reliance on the information or advice provided on this site. All users of this website accept and agree to comply with this disclaimer.  This site contains affiliate products and sponsored posts from which compensation is received. 
Privacy Policy
Sitemap

Copyright ©2020 Personal Finance Genius, All Rights Reserved

Photos used under Creative Commons from RL GNZLZ, danielmoyle, Maxim34374, C. Matges, Derek Bridges, FAS Fotos, Celestine Chua, Lion Multimedia Production U.S.A., mighty.travels, bobbi vie, Tom Hannigan, @CHURCH4U2, RLHyde, symphony of love, Sam Howzit, Wonder woman0731, Fisher Chia, Benoit cars, cafecredit, RL GNZLZ, torbakhopper, Elvert Barnes, BarnImages.com, Clint__Budd, GotCredit, apardavila, Barta IV, Falcon_33, 401(K) 2013, okchomeseller, moneypictures, Janitors, timsackton, superba_, Insulinde, marsupilami92, jonseidman, Dave Hamster, torbakhopper, Montgomery County Planning Commission, Tyler Merbler, Cassandra Kinaviaq Rae, Marco Raaphorst, Jason Cartwright, Elvert Barnes, Skin - ubx, Tobyotter, mikecogh, Max Denisevich, GotCredit, Davmi Pics, Senado Federal, DonkeyHotey, anotherlunch.com, investmentzen, michael_d_beckwith, OC Always, mrgarethm, Paul L Dineen, Janitors, torbakhopper, Dana Lookadoo - Yo! Yo! SEO, Lummi Photography, Daniel 5tocker, krossbow