Since mid-2014, crude oil prices have been on the decline, causing gas and other oil-product prices to drop quite a bit. “Although the long-term effect of falling oil prices remains to be seen, this dramatic price change is affecting Americans’ everyday lives in a number of ways,” says Sharon Duncan, a Houston-based investment manager.
Big savings at the pump
You’ve most likely noticed that it costs a lot less to fill your car’s tank these days, with the average gas price in the U.S. hovering just below $2.30 per gallon. According to Gluskin Sheff & Associates, Americans stand to save about $1.5 billion for every penny that the price of gas falls.
Thanks to this extra cash in our pockets, personal spending jumped 4.3 percent in the fourth quarter of 2014, up from 3.2 percent in the third quarter. In January 2015, consumer confidence was at its highest level in more than seven years.
So what are Americans doing with all this cash and confidence? Spending has increased in two key areas:
- Buying new cars: Auto sales climbed in January (typically a slow month), and the National Automobile Dealers Association Chief Economist, Steven Szakely, predicts U.S. auto sales for 2016 will set a new record high.
- Traveling internationally: Combined with the strong dollar, lower international airfares have many people taking trips abroad.
“Of course, buying a new car or finally taking that long-awaited trip oversees is a lot more glamorous,” says Duncan, “but investing some of this extra income in your kids’ college savings or putting away a little extra for retirement will give you the real added benefit.”
Just consider how much more fun your retirement will be when you have enough money for the lifestyle you really want, adds Duncan.