There is an importance in the change in gas prices that you see every day at the pump. We will explain why that matters for the U.S. economy. Every day as you drive in and out of work you probably see the gas price change up and down sometimes by only one penny or so. On average you don’t really see a lot of movement. It’s very important to watch that number because of how many Americans drive and how much gas we consume. In 2017 U.S. drivers consumed 142 billion gallons of gas. That breaks down to roughly 391.7 million gallons of gas per day. If you look at a one penny change in the price of gas, that’s $4 million dollars, give or take, to the U.S. consumer each day. Last year the average price of gas was $2.52 and right now, it’s $2.48. That equates to, over that year period, roughly $6.5 billion dollars in consumer savings. That’s money that the U.S. consumer can spend on groceries, eating out, going to movies and other discretionary items. Gas is something that is relatively inelastic which means that the consumer must spend it. If prices go up, people really don’t drive that much less at first, so all that does is shifts money from food and other discretionary things into that gas budget. For each slight move in gas price, it shows that it can have a huge rippling effect on the U.S. economy with consumer spending and how publicly traded companies perform. Next time you’re driving to work, see if you notice how much the price is moving and remember for every penny it equates to around $4 million dollars to the U.S. bottom line which can be very impactful.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
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