Gasoline Prices: Where Did All the Money Go?

One of the burning questions on investors’ lips as the economy fares only modest gains in economic growth is what happens to the extra dollars freed up by falling gasoline prices. A closer look within the latest sales report might help answer that conundrum. The price of gas has provided a windfall to consumers over the past several years. Despite watching auto sales accelerate to the highest in many years, dollars spent at gasoline stations ($35.1-billion) fell during October. More interestingly, however, is that such spending as a percentage of total spending fell to 7.8% and is the lowest proportion since October 2009. Six years ago, consumers actually spent $1.3-billion more on gas, but the percentage of 10.1% represented a larger slice of the household pie. Compared to back then, last month consumers spent a whopping $83-billion or 22% more across the board. Let’s turn to auto sales over the same period, where the dollar value of spending jumped from $50-$86-billion (+72%). Consumers are spending less these days on gasoline as energy costs decline and as technology gains improves mileage metrics. But to question why windfall gains are not showing up is futile when you consider how car buyers are devoting more income to five-and-six-year auto loans.

Chart – Smallest proportion spent on gasoline in six years

(click to enlarge)

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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