Economists and investors are dying to know what consumers are doing with their gasoline savings windfall. Will they save it, invest it, or upgrade their mobile phones?
To answer this question, the data analysts at Bespoke Investment Group first determined how much the windfall is. I won’t bore you with all their calculations but basically they determined a total consumption figure then divided by the monthly gasoline retail price and compared last year’s level with this year’s level.
Restaurants have benefited most from the gas price plunge windfall. |
They figure that roughly $24.4 billion has been saved at the pump since gasoline prices have been falling. And of course that does not include the “perceived” savings to the collective consumer psychology, as studies have shown that there is a multiplier effect in which a single dollar saved ends up feeling like several dollars earned. This is why consumer confidence figures soar disproportionately from a decline in gas prices.
Anyway, of that $24.4 billion saved, Bespoke figures that $21 billion has piled up since October alone, when the gasoline price plunge really got rolling.
So what have you Americans been doing with your “reverse tax”? Contributing to charities? Saving and investing for the future? No —
You, my fellow Americans, have been eating more. And drinking more. And buying more gas guzzlers. Congratulations, you are blowing your windfall.
According to Bespoke data, which comes from government sources, spending on cars and restaurants are up 8 percent vs. a year ago, and 4 percent more on sports and hobbies. So basically you are spending your extra $24.8 billion on burgers and fries, new wheels, and having fun.
The stock group that has benefited most are restaurants, with Wendy’s (WEN), Pollo Loco (LOCO), Sonic (SONC), Jack in the Box (JACK) and Cosi (COSI) performing best this year, up 10 percent to 76 percent. As a group, restaurants have surged 25.6 percent over the past four months. That is a huge gain in a short period, so you don’t want to pile in now. But it’s a good concept to put in your back pocket for the next time there is a consumer spending windfall of any kind.
What are you doing with your savings from lower gasoline prices? Do you believe the savings will be long-lasting, or are you gearing up for higher prices in the future? Click here to comment.
Best wishes,
Jon Markman
{ 53 comments }
Attributing the rise is wheels, burgers and hobbies to falling gas prices is correlation folly – which only idiots will pay any attention to.
I’ve been doing the same “5000 miles year” I’ve done for some years and saving money. The price of groceries has taken it’s share of any gas savings. Sysco predicts food costs will increase 5% this year. Everyone knows the paltry Social Security increase we got this year because there’s “no inflation”. Right! If you don’t eat.
Getting ready to buy a new car for my wife, electronics, and improvements on my second home in the country.
As a retired couple in Scottsdale, AZ……the savings that result from lower gas prices is a rounding error in our monthly expenses.
It appears to me that many restaurants are raising prices in order to get a bigger share of the windfall.
My wife and I put 5,000 miles a year on the car that gets 20 mpg that equates to about 250 gallons of gas a year. If I am saving about a dollar a gallon that is a whopping 250 dollars savings. That is not even close to what my increases are on our medical insurance. With the 12,000 dollar family deductible it is useless unless I have a a major health issue in which I am still liable for the first 12,000 dollars. So for most basic health care needs which I pay cash for my wife and I fly to Costa Rica for treatment as it is much cheaper even with air fare. My blood pressure med. is 450 dollars a month which I pay 150 dollars co-pay in US. I get the same medication and same company brand outside US for 45 dollars for three month supply. Also my property taxes went up 1400 dollars a year due to the supposed increase in value due to the housing recovery.. Yet when I check the listings houses are on the market awhile and prices for my type of house remain the same or less then when I bought. I can not wait to retire and move to a place where cost of living is much cheaper and maybe that would help my blood pressure too!
Where in Costa Rica and which doctor? Sounds like a good strategy, although I’m on the West Coast.
Also, they are cutting portions. Wendy’s large chili now comes in a smaller container than previously. Here in FL’s “season” you are lucky to find an empty parking place at any of the restaurants on most any night. It’s the same at Walmart and Publix Grocery. Living alone, I must be one of the last people who cooks now and then or nukes a TV dinner. The good thing is there is Netflix or Amazon or a good book for a reason to stay home. Sometimes I go to Walmart at 11 p.m. when most people are home. The parking lots are well lighted, the cops are patrolling and I’m not fighting the masses.
Yes, Steve…we all want to know especially about medications. I can’t find mine in Canada.
We have been saving more back in our checking account and I have been saving cash back for Obamacare monthly payments, fines for not having health insurance in 2014, Home and car insurance premiums and property tax and recent dental work. I only have social security and a little money from helping drive an older friend around one day a week.
The temporary fall in gas prices is more than offset by food price increases, have you purchased hamburger lately? This is another sign that the Middle class is slowly and steadily falling into the poor house. All the while, state, local and more specifically federal government grows. Higher education and medical services costs are growing at an 8% clip, annually. Falling gas prices, temporary as they may be, cannot offset the multitude of increases in many other areas of our lives!
Enjoy commentary
I have paid down debit and saved. Our family wanted to be totally debt free so that we could save more. We eat at home and only buy what we need because times are going to get worse, not better.
The $24.4 billion in savings must also include the business and commercial sectors – surely businesses aren’t wasting their reduced costs on eating and fun. So, subtract those (business) savings from the $24.4 billion and divide the remainder by the millions of individual drivers – the so-called “windfall” (per driver) is anything but significant, and certainly not a windfall.
Still, the “Ugly American” continues to show disdain and ignorance of financial responsibility by gleeful and wasteful spending on food, drink and fun without thinking of their real future needs. I won’t even waste words or thought on those fools who use this minimal petrol cost reduction to justify purchasing a gas-guzzling SUV. Oh well, at least they’ll have their Social Security for living.
Ugly, yes… When I mentioned to a gal that she could get eggs on sale at another store, she just laughed and showed me a food voucher (a subsidy of some kind), while she proudly stated that it didn’t matter! Hard to believe people like this don’t get it, but what will they be taking next as the money runs out? Our homes? What next?
If a drop in the price of gasoline results in more consumer spending, then the politicians should aware that an increase in any tax increase that hits the average person of low or middle income means less spending and less federal taxes. A two cent tax would be high, but likely. There should be no exception for oil exported even if it will be partially refined.
With the higher cost of health care, th
Since two of our three vehicles died (i.e. repairs to get them running would cost more than their blue book value after repairs), we have had to buy two more used vehicles, a 2003 and a 2004, to replace the 1993 and 1999 vehicles that died. The payments on these two vehicles far outweighs the gas savings. What was that old song? “You load 16 tons and what do you get, another day older and deeper in debt.”
With the higher cost of health care, the increase in groceries, and the few times we have eaten out the restaurants they have indeed raised their prices. Our local Arby’s is on it’s third reprinting of it’s menu, raising prices each time. From our budget we haven’t seen any windfall from lower gas prices. Where do all these numbers come from showing this big wind fall?
With all these gas money saving is anybody paying down credit card debt or saving for retirement? Don’t see anything to that affect in the above stats.
Yes. We are saving and have now paid off all our debt, including house, but we didn’t do it from just low gas prices, though they helped in a small way. We sold stocks that had finally risen enough to pay off the house, car, and all (we had very little) credit card debt. Health care cost are eating into savings for the future though.
What is your take on an Israeli company developing a product that monitors your heart —
approx. 12 electrodes — and it’s technology is interwoven into upper body apparel? I
believe that the product or name of the company is “Heartwear.”
Your figures are a joke. Where else have prices fallen. I see no lower prices elsewhere.
The lower price of gas has eased the pain. However I only fill up once every 2 weeks, so I don’t have a giant pile of money. I took the kids out to eat, I had never been able to do that, since they were very young. We played pool,(and I was able to pick up a tab.) My wife did an IHOP breakfeast for the whole family. I know that is very sad, But it has helped the lower middle class to spend a little more, and save a little more, and invest a little more. We work for our money, have no government money coming to us. That is how it really is.
I think the value of the $24.4 is somewhat higher.
Just as businesses have overhead expense so does the consumer. For every dollar spent on gas one would have to pay many levels of tax and other expenses. When we think of cost savings, this portion is not so apparent. I was fired from a high value job one time for this exact error. (They hired me back before my two weeks notice was up.) I had failed to account for the value to company when costs were saved. I said we would save $100,000, but the actual was $250,000. That is a big mistake where I come from. I had made the cost suggestion, so the error was mine but the cost savings, the $250,000 value to the company were mine as well. Thank goodness. I would guess your $24.4 billion is more like $40 billion if you look at the numbers in this way. It is a big deal. (By the way the error is yours because you did not catch it!) This is not psychological value, this is real dollars!
This proves that if we give money through minimum wage increase, or government benefit increases, paid for by taxes on the high earners and rich, the economic pie will be larger, retirement funds holding American securities will be better funded, and we will all benefit! It is a great test for the Keynesians among us!
Did you ever hear of killing the golden goose? You like spending other people’s money. You can only cut the pie in so many pieces. The solution is work, save, invest, and be as productive as you want others to be. Grow the economy, do not eat the goose.
Buying more silver this is not going to end well for the usa.and eating more on the grill at home the foods better here.
You are investing in the future of your family and the country.
Although my gas savings is small, it will probably cover my trip to IHOP. I only eat in a restaurant if visitors are in town, two or three times annually. I had a really nice long brunch at IHOP and was surprised how busy it was. About seventy percent of the tables were full for the 2.5 hours I was there on a Monday.
Windfall? How about a ‘twigsnap’. It’s hard for folks (but not impossible) to invest a trickle.
From the ‘Preaching to the choir’ dept: you need to be extremely cognizant and diciplined to invest small amounts. The good news is that crowdfunding techniques will change at least the opportunity part of that.
Spending extra on personal things like computer, cell phone, clothing and like everyone else food. When the prices go back up, as they will, I’ll revert back to old habits. At least I’ll have a new wardrobe, new computer and phone to use. The quality and quantity of food will just have to suffer.
Yes, gas is going down, but the cost of restaurant meals is continually going up. It’s like we are treading water instead of swimming.
I think that gas prices here in California will need to increase. The state should add a dollar a gallon tax to support the upgrading of infrastructure. I can afford it, after decades of saving for retirement. [That’s a habit more people should get into!]
Adding beans, bullets, and bullion.
I believe the savings will be long-lasting. I do not need gasoline increase high price. When the gasoline increase high price, the benefit go to some investors only, but effect to people around the world, the goods and services will increase price too.
Education for our sons. One is in college, one is getting extra music lessons. We are saving about $20 a week. In the meantime, groceries have gone up more than that. If you think there is a reverse in any kind of savings here, you must be kidding.
SAVINGS? Yah right, that was short lived and never made much of an Improvement for the Middle Class let alone the Poor. Those Greedy OIL Corporations won’t let advancements for the Middle Class or Poor to last long!
They always leave the Carrot just far enough out, away to tease but never let the Working People Advance so some one is left to fill their Greedy Pockets with more Money!!!
Kindly read this and help us, then pass it on to Your Face Book Friends:
http://www.gofundme.com/LymphaticSchool
The u.s. oil frackers were why oil prices went down. The Saudi Arabians are driving them out of business by dumping oil on the markets. I would rather see employees of and investors in our oil companies do well. Get your priorities straight.
Spend it-it’s the American way! It will help offset jobs lost by less oil production, by creating new jobs in other sectors.
I am saving my gas windfall money to pay my taxes on 4/15. Unfortunately its not enough.
Some of the car purchases are related to terms of credit–longer maturities and questionable underwriting.
well we took the easy route, one jack in the box deluxe breakfast and tht has been it.. Rest has gone to help pay on our utility bills, as even in the desert it can get down to 33 degrees here in southwest. other than that we keep our tank FULL thanks to the free $$$$
wish it would stay this way, but give it time, the refinery here in south California seems to have a FIRE, yeah right, but they will most likely put the screws on us as that is how the rich oil bums stick it to us consumers. that have to pay and pay,, so we wish ALL a prosperous year and keep on smiling.
I can keep stacking a little more silver each month. I don’t believe oil prices will rise soon with this worldwide depression. And I am sure real estate will decline another 20-30 percent from current prices. Good luck to all.
My savings adds up to just about $100 a month. Last week I bought home security system (a handgun and some Ammunition). Next savings will buy insulation for my attic.
To paraphrase a poster over at “Zero Hedge”:
“I recently cancelled my membership in the local neighborhood watch & cut my subscription to ADT. Instead, I have placed 2 Pakistani flags at each corner of my front yard & hung an ISIS flag off of my portico.
I am currently being watched by the local police, county sheriff, FBI, Secret Service, NSA, CIA, etc. & there are currently 3 unmarked vans parked across from my property on a 24 / 7 basis.
My family has never felt safer & we’re saving an additional $79.99 / month!” :D
You are very funny. I would pay to see you in a stand-up comedy routine. You gave me and my husband a good laugh.
There was another time when oil prices / inventories almost exactly mirrored the current reality. That was 1929 &,- as they say – “the rest is history”. Good luck!
My “considered” investment advice for “gas savings” reallocation: The all important “4 B’s”: “Beans, Beverage, Bullets & Bling (PMs).”
Savings at the pump allow me to purchase the same quantity of STUFF at their higher prices. Fuel prices will increase as the existing reserves are drawn down and renewed at higher cost.
Food prices here in Canada have gone up and are going up further so any savings on gas evaporates in the grocery store.
I really don’t care much about what consumers have done, but I am severely disappointed at Congress for not having seized the chance to increase the gasoline tax without raising an outcry, in order to replenish the Highway Trust Fund, resume infrastructure spending, and create jobs in the process. I know many in congress feel constrained by their pledge to Grover Norquist not to raise any taxes, but these really are “user fees”. I heve written to Grover to consider releasing his followers from “The Pledge”., but so far am waiting. R.G.
Many tax payers cannot afford more taxes, and those who can have advisors who help them avoid taxes. The rich liberals belong to that last group. Is that you?
Since my husband and I are retired and share a car, we only drive 10K a year. However, I did upgrade my phone ($299 out of pocket with a contract). Yes, I love smartphones!
I am helping a grandchild in college, and giving to church, and having family eat with us, often.