2 Reasons Your 2015 Vacation Could Be a Lot Cheaper
Falling Fuel Costs Mean Good News for Drivers (and Maybe Fliers)
Americans have already seen the huge impact that falling prices at the pump have had in their daily lives. Earlier this month, average gasoline prices fell below $2.20. That's more than $1.10 less than the $3.32-per-gallon average from this time a year ago, and prices have fallen more than 50 cents per gallon in just a single month. Several states have seen their gas prices fall below $2.
Cheaper gas prices equate to huge savings for Americans. Drivers saved about $14 billion on gasoline in 2014, according to AAA, and that figure is based on just a 15-cent decline in year-round average prices. If gasoline stays at current levels, it could equate to more than $100 billion in savings.
Obviously, lower prices at the pump are good for those who are looking to go on long road trips. But lower fuel costs could also give airlines and other transportation providers an opportunity to reduce fares.
Unfortunately, that's far from a sure thing. In the past, you could count on competitive pressures to force airlines to cut fares, passing through any savings from cheaper fuel costs to travelers. But massive mergers in the airline industry in recent years have reduced the level of competition, and right now, demand for air travel is extremely strong despite relatively high airfares. Even with fuel costs already having fallen so far, few airlines have moved aggressively to take away the fuel surcharges they imposed when energy prices were on the rise. As long as the planes remain full, you won't necessarily see widespread relief from costly air travel -- but you might at least see a slowdown in the price increases that many have encountered lately.
The Strong Dollar Means Your Money Goes Further Abroad
If you have more ambitious travel plans for 2015, there's even more good news: the U.S. dollar has been extremely strong. In early 2014, it cost nearly $1.40 to buy a single euro, the currency that most European countries now share. As 2015 begins, though, you can now buy a euro for just $1.19, the cheapest exchange rate in nearly a decade. The British pound has also weakened compared to the dollar, now fetching just $1.52 per pound compared to around $1.64 a year ago.
You'll find similar trends in many other popular travel destinations. In Japan, the dollar will buy nearly 120 yen, up from 105 yen this time last year. Similarly, U.S. dollars will go about 10 percent further in Canada than they did in early 2014, and travelers to Australia will see a similar 10 percent bump in their purchasing power compared to last year.
Some destinations have seen even bigger gains for the dollar. In Brazil, the dollar will buy you about 15 percent more of the local currency. And Russia has been the big loser in the currency game, with the current exchange rate of 60 rubles per dollar almost double the rate you would have gotten this time last year.
Motley Fool contributor Dan Caplinger is hoping to take at least a couple of trips this year. You can follow him on Twitter @DanCaplinger or on Google+. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.