Driving around almost anywhere, you see the glaring signs for the price of a gallon of gasoline.
But these days, those signs are a welcome relief.
Gas prices have dropped dramatically in recent weeks, and that could bode well for the holiday selling season.
The average savings is about $30 to $40 per month. Think about what you could spend that money on.
Every little bit helps the economy as the savings start to add up.
Besides, those signs have an effect on the psyche that can help the economy. When the prices keep going down and we are reminded of it every day when we see those prices while we’re driving, we think we’re saving bundles.
And we are.
I filled up my car with gas last week, and I don’t remember the last time I saw the price below $3 for premium gasoline. Twenty gallons totaled less than $60.
Just a few months ago, I was paying $80 to fill up my tank.
That $20 savings could buy me a nice lunch or a couple of dozen doughnuts at one of the new shops opening across the metro area.
Multiply that type of savings by the thousands of people living in the Richmond area, and it can really provide a boost to consumer spending.
The national average price of a gallon of regular gasoline fell from $3.68 in May to $3.38 in September, and was $2.79 as of Friday, according to AAA.
In the Richmond region, the average price for regular gasoline stood at $2.56 a gallon on Friday, AAA said. In some places, prices were as low as $2.49, according towww.richmondgasprices.com.
Drivers are saving an average of $38.62 per month, if we assume their cars get 25.3 miles per gallon (that’s a conservative estimate, based on the University of Michigan Transportation Research Institute’s average sales-weighted fuel economy calculation for new 2014 light-duty vehicles). The figure also is based on a car owner driving an average of 13,476 miles a year.
For the entire Richmond metro area, that adds up to $30.3 million in savings per month. That can buy a whole lot of doughnuts.
If that amount was spent at restaurants, it would support an additional 9,415 jobs in the metropolitan area each month.
Some of those jobs are for restaurant employees while the rest are positions in other industries, such as food manufacturers, restaurant supply businesses and transportation. Those people who become employed by the restaurants or who receive longer working hours now have more money to spend.
That “ripple” effect from the lower gasoline prices will contribute to a lower unemployment rate.
Let’s say gasoline prices stay low through February.
In the next three months, that would free up $91 million for spending on holiday gifts, representing about 2.3 percent of the region’s total retail sales.
Such a boost in spending would undoubtedly outstrip the predictions of 4.1 percent sales increase during the holidays that the National Retail Federation predicts.
A year of savings would boost sales in the Richmond area by $363.9 million, if all savings from gasoline are spent in the region.
The sales taxes from all this spending would be welcome at a time when the state continues to bear the weight of reductions in federal government spending.
Those gas signs these days are good for the economy.
Christine Chmura is president and chief economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or at firstname.lastname@example.org.