Gasoline - A Pay Raise for Consumers?
Average retail gasoline prices in the U.S. began falling continuously in the fourth quarter of 2019 beginning with an October 6, 2018 price of $2.98 per gallon to reported prices of $2.34 per gallon as of January 14, 2019. The U.S. Energy Information Administration (EIA) provides weekly statistics on gasoline pricing and usage, among other energy statistics. Compared to average prices for the country as a whole, regional prices can vary based on the local tax structure and the effects of distribution costs. For instance, local prices in my immediate area ranged between $1.85 and $1.95 during the seven days ending January 14, 2019. During 2018, prices fluctuated from a high of $3.04 as of May 28 to a low at year end of $2.36. Some analyses credit higher domestic oil stocks and expanded transportation capacity, among other developments, for the price decline, but the reasons for this trend vary.
Daily gasoline consumption reported by the EIA in the United States totaled 391.71 million gallons per day in 2017 while 2018 consumption data was not released. If daily consumption remains stable in 2018, the price drop from October 6, 2018, to January 14, 2019, is worth $250 million for one day in the country for individual and commercial consumers. Stated another way, each price drop of one cent per gallon saves consumers $3.92 million per day. While recognizing commercial users, for individuals working in locations requiring transport via a personal car to maintain employment, gasoline price fluctuations can be an unexpected bonus when prices fall and an unexpected tax when prices increase. Consider the employee who earns $40,000 per year or $769 per week before taxes. Assuming the family vehicle has a 20-gallon gas tank that requires a refill twice per week for normal driving to work, dropping children off, errands and other tasks, the savings from a price drop of 64 cents like that experienced from October to January leaves over $26 per week in the pocket of the family, an amount equal to a 3.3% raise on pretax income and even more on after-tax income. The immediate cash savings allow for purchases of groceries, school clothes, and essentials and relieve pressure on all households, but especially working-class households.