Lower prices at the pump, down about 60 cents a gallon from
a year ago, will have the equivalent effect of cutting taxes in the U.S. by
between $100 billion and $125 billion, Goldman Sachs economists said
Wednesday. Americans spent $370 billion on gasoline last year. The benefit will
flow across the economic spectrum, but help the middle class most.
Goldman’s estimate was increased from a previous expectation
for a $75 billion consumer stimulus. The revision came because the OPEC
cartel last month choose not to cut production, a development that pushed down
oil prices further.
Other economists have estimated lower gas prices could save
the average household as much as $750 annually. According to AAA, the
average price for a gallon of regular gasoline the U.S. was $2.64 per
gallon on Wednesday. That’s down 30 cents from a month ago, and 62 cents
from a year ago.
Increased consumer spending as a result of lower gas prices
could add as much as a half-percentage point to economic growth in the next
year, Goldman said. However, the effect will be partially offset by lower
U.S. energy production.
Consumers should step up purchases first at gas stations and
auto dealerships. When gas costs less, consumers buy more of it by volume.
Consumers also tend to spend more on vehicles. The effect is primarily seen in
buying more expensive rides–due to higher sales of pickup trucks and SUVs
compared with small cars–rather than a higher total number of purchases, the
report said.
Prolonged lower fuel costs would increase the number of
vehicles owned per household, Goldman said. And the longer fuel prices stay
down, the more shoppers will increase spending at other outlets beyond gas stations
and dealerships.
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