- Title: MARKETS-OIL/RETAIL SPENDING Lower gas prices may fuel holiday spending
- Date: 5th November 2014
- Summary: UNIDENTIFIED LOCATION (FILE) (REUTERS) VARIOUS OF OIL PUMP BAIJI REFINERY, BAIJI, IRAQ (FILE) (REUTERS) VARIOUS OF OIL REFINERY
- Embargoed: 20th November 2014 12:00
- Topics: General
- Reuters ID: LVAD0T5BOKJE6GBCZ5I6G1J9YB7K
- Story Text: As crude oil prices plunged to a three-year low, the consumer savings at the gas pump may spark a much-needed boost to retail sales just in time for the holiday shopping season.
Consumer spending on gasoline has fallen from a $381 billion dollar (USD) annual rate in June, the highest spending money all year, to just $341 billion last month. That's a drop of more than 10 percent in just a few months.
The gas savings may fuel a spending spree in other areas of the economy.
"I think low gas prices offers the opportunity for people to spend more in other areas, more on the house, more on food, more outside entertainment," said Larry Clark while at a gas station in Alexandria, Virginia on Wednesday (November 5).
The savings also may lead to a celebratory shopping mood this holiday season.
"There's a lot of people who don't have a lot of leeway on what they have money to spend on, so gas is one of the things that is a necessity for them. So if that's gone down then they have a little bit more in their pocket to spend on holiday," said Pam Rubin.
The savings will be a welcome help to low income households said Chris Christopher of IHS Global Insight.
"The lower income households, they spend a large proportion of their overall outlays on gasoline. In addition, median household income adjusted for inflation is currently about eight percent below where it was in 2007. So there are a lot of Americans who are living paycheck to paycheck. So when you live paycheck to paycheck and you get a little pump price relief, that gives you a little more spending power. And you are going to spend it. You are not going to save it."
He added, "We're headed into the holiday retail sales season, so the first thing is people are going to have to buy turkey, the turkey dinners and all that kind of stuff. However, the sort of big ticket durable items, large screen TVs, fancy phones, etc. They should do very well."
Global crude prices have slipped by about 25 percent since touching a high of $115 in June, hurt by excess supply, including from North American shale fields, and weak demand from China and Europe. Natural gas prices have also been depressed due to a supply glut in North America.
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