Since mid-2014, crude oil prices have been on the decline, causing gas and other oil-product prices to drop significantly. Although the long-term economic impact remains to be seen, this dramatic price change is affecting Americans' everyday lives in a number of ways.
Big savings at the pump
The most notable change is 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. Overall, U.S. consumers save about $1.5 billion for every penny that the price of gas falls, according to Gluskin Sheff & Associates.
Thanks to the extra cash in Americans' pockets, personal spending jumped 4.3 percent in the fourth quarter of 2014, up from 3.2 percent in the third quarter. In January, consumer confidence was at its highest level in more than seven years.
What are Americans doing with all this newfound cash and confidence?
- Buying new cars. Auto sales climbed in January (typically a slow month), and the Conference Board reported an uptick in the number of people planning to buy a new car in the next six months. According to Kelley Blue Book, sales are expected to rise 13 percent, to 1.14 million, in 2015.
- Booking international travel. Combined with the strong dollar, lower international airfares have many people planning trips abroad in 2015.
What isn't changing...yet
Of course, lower oil prices aren't translating to lower costs across the board.
- Domestic flights. Although traveling internationally or gassing up for a road trip might be cheaper, domestic airfares look unlikely to budge in the near future. If oil prices continue to drop, fares may start to decrease later in 2015.
- Real estate. In communities where oil-related industries provide many local jobs, falling prices have the potential to put a damper on the real estate market. In other communities, the savings from oil costs (in terms of home heating, transportation, and the like) might actually boost homeownership. In any case, there tends to be a substantial lag before the real estate market reacts to such price drops.
For most people, a welcome boost
Along with positive economic factors, lower oil prices have bolstered Americans' purchasing power, allowing people to spend more (or save more). So far, the drop in oil prices has had mostly favorable consequences for the everyday consumer.