NEW YORK (MainStreet) — Cheaper gasoline prices have been a boon for consumers, who remain saddled with debt amid stagnant wage growth. But where exactly are they spending the unexpected cash savings that's dropped like manna from the low crude-price heaven?
With the average gas price at $2.81, nearly a dollar less than a year ago, 42% of consumers say they're using this extra savings to pay down bills, according to a June Gallup poll. By contrast, only 24% of respondents said they were spending the money and 28% said they were saving it. All in all, 57% of Americans said the dip in gas prices is making a “noticeable difference in their household finances.”
And though the extra cash in their pockets may be helping them pay down their debt, it's not quite the economic shot in the arm many had hoped for.
“This suggests that the extra money in Americans' pockets is not bolstering the economy as some predicted in 2014,” wrote Art Swift, a Gallup managing editor in the report.
The Gallup poll also found only “modest differences by income, meaning lower gas prices are not disproportionately helping lower- or middle-income Americans more,” he said.
Oil prices started their rapid descent last summer partly because of the surplus in inventory and started declining from $3 per gallon. Since last November, prices have been dropping and fell as low as $2 per gallon.
The U.S. average retail price for regular grade gasoline is $2.81 per gallon or $0.89 lower than a year ago at this time. In the third quarter, gasoline prices will decline to $2.52 per gallon and dip even lower to $2.33 by the fourth quarter, said Timothy Hess, a lead analyst for the Energy Information Administration, the independent statistical arm of the Department of Energy based in Washington, D.C. Oil prices should remain in their current range of low to mid $60 per barrel, he added. GasBuddy reports the state with the cheapest gas is South Carolina where gasoline prices are $2.46 a gallon ad most expensive in California where they're $3.48 a gallon.
The average American household is predicted to spend about $700 less on gasoline in 2015 compared with 2014, Hess said.
The majority of drivers are paying 30% less for gasoline today than in 2014, said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University’s Cox School of Business in Dallas.