Holiday gift: Lower gas prices could boost economy

Falling oil and gasoline prices should deliver an early Christmas present to holiday shoppers and the economy in coming weeks, lifting consumption by a few billion dollars a month, economists say.

At the same time, sliding crude prices will hobble a resurgent U.S. oil industry, analysts say, but that will only partly offset the overall benefits for the economy.

“It’s going to put more money in consumers’ (pocketbooks) to spend on other goods and services,” economist Chris Lafakis of Moody’s analytics says.

The price of U.S. benchmark oil has plunged 26 percent from $76 a barrel in early October to around $56. Economists cite the Trump administration’s decision to ease restrictions on Iran’s oil exports as well as record production by Russia, Saudi Arabia and the U.S. There are also concerns about slowing global demand.

So far, oil’s tumble has only partly filtered into gasoline prices. Regular unleaded averaged $2.67 per gallon nationally Thursday, down from $2.90 a month earlier, according to AAA. The drop in crude prices, combined with a typical seasonal slowdown in U.S. driving, should push gas prices to $2.25 to $2.50 a gallon in the next few weeks, says Tom Kloza, global head of energy analysis for the Oil Price Information Service.

That would save Americans $2.5 billion a month, or $30 billion annually, compared with average oil and gas prices in the third quarter, assuming the lower pump prices are sustained, Lafakis says. Economist Paul Ashworth of Capital Economics estimates the monthly savings at $3.3 billion, and Kloza puts it as high as $5 billion.

The average household would save $20 to $40 a month, or $224 to $480 a year, depending on how low prices go.

The savings are more limited so far but they’re making a difference for some. Leslie Fox, of Columbus, Ohio, has to make two different dinners each night because her daughters are vegetarian or vegan while her sons only eat meat.

With gas prices lower, she’s bringing in prepared food from grocery stores or restaurants three to four times a week, up from once or twice previously.

She figures she’s saving about $4 each time she fills up compared with a month ago. “It’s a psychological difference,” she says. “It feels good so you go, ‘I’m buying that bread.’ ”