Gas prices in the US are at a 6-year low

Trading Nation: Nat Gas Hits 13-Year Low
Trading Nation: Nat Gas Hits 13-Year Low

Gas prices in the US are at a 6-year low.

As of the week ending December 14, the average price for regular gas was $1.953 per gallon, less than the $1.982 per gallon low seen back in January 2015 after the initial crash in oil prices that took place in the second half of 2014.

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Over the last year and a half, the price of oil has been on a steady march lower, taking gas prices with it though the pass-through to the pump has been on a bit of a lag. This month the price of West Texas Intermediate crude oil — the US benchmark — has plunged to a fresh 7-year lows, taking with it gas prices in the US.

Commentary around the future of oil prices has been mixed with some analysts calling for a stabilization and eventual rebound in prices while others think crude is heading to $20 a barrel or lower.

Last year, conventional economic wisdom said the decline in oil prices would be good for consumer spending.

Retail sales, a popular measure of consumer spending, have been a disappointment this year. This has led some to argue that the downside of low oil and gas prices, namely a decline in employment from sectors related to the production of oil, is a bigger negative for the economy than any savings consumers might accrue.

But personal consumption expenditures — which is a component of the quarterly GDP report and measures how much money people spend on goods and services, not just in retail locations — has risen at a solid 3% pace this year, backing those who don't think it's bad that consumers have more money to spend. (Even if, as research from the financial crisis shows, cheaper gas means consumers simply buy more gas.)

And with gas prices at multi-year lows — we'd note that were prices to dip below $1.59 a gallon, gas would be at its lowest level since 2004 on a nominal basis (that is, not adjusted for inflation) — fortunately this endless debate about whether cheap gas is good or bad for consumers and the economy can continue.

fredgraph (1)
fredgraph (1)


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