Economics: Falling Gas Prices - A Gift To The Consumers & A Tailwind For The Economy

(Drivebycuriosity) - Good news for US consumers - gasoline prices are falling. Today gasoline costs on average $2.39 (aaa.com).  The average gas price @ US pumps dropped 28 cents (10%) since last month and plopped 59 cents (about 20% ) since the peak this summer. Today gasoline costs 6 cents (2%) less than a year ago (chart below).

Falling gas prices are also good news for the economy. Americans depend on gasoline. Many live in suburbs and need to drive to go to work, to shop & to spend leisure time. High gas prices curb their available income. It is not surprising that high gas prices constrain consumer spending  - as they did this summer - and that falling gas prices encourage spending for other goods. The recent gas price drop came right in time for this year´s holiday retail sales and is now delivering some tailwinds for the US economy.

                                       ( fuelinsights )

What causes the drop? Gas prices are usually falling in autumn (seasonal) because people drive less in autumn & winter. But they also depend  - and even more - on the global prices fur crude oil. Fortunately prices for crude dropped about 30% recently - thanks to the global oil glut and rising US production caused by fracking ( driveby). Below you can see the charts for  WTI (American type of oil) and Brent Crude (international type). 

                                                  

  (tradingeconomics  )



It looks like that gasoline will stay relatively cheap in the coming months. Opec is struggling to hike oil prices again. The global oil glut won`t go away, because the US frackers, the cause of the oil flood, will continue pumping, thanks to efficiency gains and falling costs. It looks like that this year`s holiday retail sales will be better than expected.