US consumers are cautious about spending their windfall from cheap gasoline and are saving more, according to a Reuters/Ipsos poll and official data, suggesting low oil prices are less of a boon for the US economy than in the past.
Commerce Department data shows that the crude’s 70% drop since mid-2014 cut households’ annual spending on gasoline and other energy products by $115bn, equivalent to roughly 0.5% of gross domestic product.
At the same time, however, savings increased by $121bn and while the data gives no indication where the money has come from, the survey suggests the windfall accounted for a significant part of the sum.
The Reuters/Ipsos poll shows 75% of 3,068 Americans who answered questions on gasoline savings said the extra money helped them cover basic needs and the majority have not used their windfall to buy big ticket items. Over 40% of respondents said the savings had helped them pay down debts, according to the Jan 15-27 online poll, which had a credibility interval of plus or minus 1.8 percentage points.
“It obviously hurts less when I go to the grocery store,” said Karen Joines, a recruiting firm product manager from Peachtree City, Georgia. Joines, who participated in the survey, estimates she saves $30 a week thanks to cheaper gasoline but has no plans for big purchases, in part because she worries low prices will not last.
Some economists say such doubts and the still-fresh scars of the 2007-2009 recession could explain the muted effect of cheap gas on consumption. For example, the economy only in mid-2014 recovered the more than 7 million jobs lost during the downturn.
“We don’t seem to be getting the benefits from cheaper gasoline that we did when the economy was healthier,” said veteran oil economist and independent consultant Phil Verleger.
Dallas Federal Reserve President Robert Kaplan said another reason Americans appeared wary of spending what they saved at the pump could be that more and more of them were approaching retirement.
“They are conscious of that (and) they need to save more,” Kaplan told Reuters in an interview.
Half the benefit
The Dallas Fed, whose area includes the oil patches of Texas, Louisiana and New Mexico, estimates that a 50 percent fall in oil prices now adds around 0.5 percentage points to economic growth over a year, half of the impact seen before America’s oil boom.
One reason is that the oil sector has grown over the past decade, so spending and job cuts there weigh more on the whole economy.
Cheaper oil also helps less because cars and machinery have become more fuel efficient, according to the Dallas Fed.
Thanks to hydraulic fracturing and shale drilling boom that made the United States the world’s top oil producer in 2014, the nation also imports less oil than ever.