Falling Gas Prices to Fuel Economic Rebound
Archives: Investing
This past May, I wrote an article for ETR detailing how much money was being taken from the economy by $4 gas. Now that gas has dropped back to $2 a gallon (and even less in some places), could this spur an economic recovery?
Let’s look at the math from that May article.
According to the Bureau of Transportation statistics, there were 135,399,945 licensed automobiles in the United States as of 2003. If the average driver burns 50 gallons of gas per month, this means 6.8 billion gallons are being consumed each month in this country.
When gas was at $4 a gallon, Americans were spending over $27 billion on gas per month. Now, with gas back down to $2 a gallon, that amount drops in half – to $13.5 billion spent on gas each month.
Thanks to the sharp drop in gas prices, $13.5 billion per month have been freed up for Americans to spend on things other than gas. This amounts to $162 billion per year.
With expectations for the holiday shopping season so low, the dramatic drop in gas prices could be the piece of good news the market has been waiting for.
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