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Will low gas prices spark a spending surge?

Gas prices are under $3 a gallon in some states, and that means consumers could have more money to spend on the holidays.

By InvestorPlace Nov 7, 2013 2:18PM

This post comes from Jeff Reeves at partner site Investor Place.

 

InvestorPlace on MSN MoneyGas prices have a very real impact on consumer spending. That's partially because gasoline expenditures make up a decent share of U.S. household budgets, but also because they are a very common measure of pricing and inflation.


Gasoline container © Lawrence Manning/CorbisAfter all, there's no more public measure of how things cost than the gas prices trumpeted at dozens of service stations you pass every day.


In inflationary times, gas prices can be a drag on consumer spending -- but thankfully, right now we are seeing the opposite.


Well, thankfully for consumers, anyway ... big oil stocks like Exxon (XOM), Chevron (CVX) and BP (BP) are probably not pleased.


Here's what's going on in gas prices right now, and what it might mean for consumer spending:


Gas prices trending down

According to the gasoline gurus over at GasBuddy.com, "October gasoline prices fell as steadily as the leaves this month" to average $3.358 a gallon. That's the cheapest monthly average since January this year, and the cheapest October since 2010.


Furthermore, October’s average gas prices are 18 cents cheaper per gallon than September, the biggest month-to-month drop of the year. And according to GasBuddy, "Every day in October had a lower price than the same day last year, bringing the streak of days when the price was lower than the same day last year to 86 straight."


Some states are even reporting gas prices under $3 right now!


Unfortunately, that's not the trend everywhere. The most expensive stations averaged $4.146 a gallon -- marking a huge gap of over $1.20 per gallon between the cheapest and most costly pump pricing.


Happy holidays?

It's unclear how connected gas prices are to consumer spending, but as long as energy prices remain soft, it's natural to think that Americans have more cash to spend. That could be great news as we enter an important holiday season.


Of course, with economic uncertainty still pretty high the U.S. consumer might simply want to hoard that extra cash for a rainy day.


We'll see in a few weeks whether consumers really have any spring in their step, but you might want to look at the broader holiday season -- Black Friday and Cyber Monday might soon become things of the past.


More from InvestorPlace

12Comments
Nov 8, 2013 10:30AM
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gas prices aren't low, they are only less-high
Nov 8, 2013 12:42AM
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2.79 a gallon here still a far cry from where it should be. We will always be shafted by the oil companies since the got de-regulated by reagan
Nov 8, 2013 12:12AM
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Dont worry , it will be over before you can pay the bills .
Nov 7, 2013 8:04PM
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Under $3/gal in some states, huh? So the price is what... $2.98/gal? That whole two cents is really going to help peoples' wallets... especially with the impending 23 new taxes hidden in Obamacare quickly approaching.

Seriously, where do you media puppets pull your bullsh*t from?

By the way, fuel is $3.12/gal in my neck of the woods.

Nov 7, 2013 9:45PM
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$3.12 is cheap compared to SF bay area. The Shell near my home is at $3.69, but in San Francisco I saw $4.19!
Nov 8, 2013 12:11PM
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It is is till above $3 in most major population areas.  There might be some effect in smaller markets but not enough to affect the economy on a national scale.
Nov 7, 2013 10:27PM
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1959, leaded hi test gasoline .25 cents a gallon, my first new car $3000.00. 2013, no lead 87 octane gasoline $3.25 a gallon, Daughters' new car $37,000.00. The big difference? My new car got 11MPG and my daughters new car gets 24 MPG.  

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