By Tony Wittkowski | Business Reporter | The Herald-Palladium
BERRIEN COUNTY — Things have changed at the pump and drivers have certainly noticed.
U.S. gasoline prices are nearly a dollar less than they were a year ago and have been running below the 2014 peak since last spring. For the majority of Americans, this new disposable income is being spent prudently.
According to a Gallup poll conducted in June, 57 percent of Americans said lower gas prices are making a noticeable difference in their household finances, including 27 percent who said they are making a big difference.
Bangor resident Mike Collins said when he isn’t paying bills, he is normally out spending money with family. Collins said the difference in gas prices has had a big difference for his budget, but not enough to change his lifestyle.
“I have to do what I have to do no matter what the price is,” he said. “I’m going to plan more when the price is higher for what we buy. Right now it makes it easier to relax.”
Collins said he fills up his gas tank twice a week with a car that gets about 24 miles to a gallon.
He said he still remembers when drivers had to shell out more than $4 a gallon a few years ago and how much easier it has been since.
“It was like having another kid,” he said. “It was ridiculous. We’re not even the most expensive in the world. When I went to London in 1992 it was $4 a liter. That’s $12 a gallon. That’s why they all drive smaller cars.”
Oil prices began to decrease last summer because of an oversupply, an increased efficiency in production and Saudi Arabia’s willingness to allow prices to drop. After years of prices being higher than $3 per gallon for regular gas, the average price in the U.S. has been lower than $3 since November 2014.
In much of the country, gas fell below $2 per gallon at the start of 2015, though the average price in the U.S. has been rising.
When asked what they are doing with the excess money they are saving due to lower gas prices, 42 percent who were polled said they are paying down bills, as opposed to 24 percent who are spending it and 28 percent who are saving it. The poll suggests the extra money in Americans’ pockets is not bolstering the economy that much, as some predicted in 2014.
St. Joseph resident Jorry Goff said lower gas prices allow him to drive as much as he does. He said has put more than 1,000 miles on his car, despite owning it for only a month.
“I mostly save it because I have extra money now,” Goff said. “Originally, it took $36 to fill up my gas tank, now it’s only $25. That’s an extra 10 bucks.”
Since Goff fills up once every three or four days, that comes to a savings of $20 each week, or $80 a month.
“It makes sense that others are not spending recklessly as we’re often known to do,” Goff said. “Paying for debt and saving the extra cash makes sense.”
Back to the pump
Deana Mansfield, who works at the Shell gas station along Hilltop Road, said some of the money people get back from lower gas prices might be put toward road trips that are more feasible now.
“A lot more people are driving because it doesn’t cost an arm and a leg to drive across the state anymore,” she said. “That’s big for this area, with Chicago tourists coming through.”
While paying down bills could be considered a form of spending, Gallup officials said it is not spending that generally helps the economy because it covers previous purchases that were already recorded in the nation’s gross domestic product. With spending across the U.S. remaining sluggish in the early months of 2015, the poll suggests lower gas prices are not contributing to greater spending.
Among those who say savings from lower gas prices are making a big difference, a majority – 53 percent – said they are using the extra money to pay down bills. However, using this extra money to pay bills diminishes with lessening financial effect, as those who say lower gas prices have made little to no difference are the least likely to say they are using the extra cash to pay down bills.
Some forecasters have said the drop in oil has stabilized, so it is also conceivable that Americans might enter a new normal of expecting more disposable income, and that in time it might not seem like extra money after all.
(Author’s Note: This article was originally published on Aug. 6, 2015)