Lower gas prices lifting hopes for holiday sales

Experts predict cost of a gallon to reach $3.05 by end of year
Associated Press
Nov 28, 2013

No one begs Santa Claus for cheaper gasoline. Yet falling gas prices are shaping up as an unexpected gift for drivers — and for people on their holiday shopping lists.

The average price of gasoline has tumbled 49 cents from its peak this year to $3.29 a gallon, putting it on track for the lowest average since 2010, according to AAA. Because many Americans have had no pay raises, whatever money they're saving on gas has freed up a bit more for other purchases.

And history shows that when gas prices drop, consumers become more likely to splurge on dinners out. Impulse buys at the mall seem like less of a stretch. More people buy a gas-station gift card after fueling up.

Many retail analysts have forecast a ho-hum sales gain of around 2 percent this year; others predict an increase of up to 3.9 percent. But steadily cheaper gas could send holiday sales shooting above 5.4 percent, analysts say.

"Every little thing moves the needle at this point," said Carl Riccadonna, senior U.S. economist at Deutsche Bank. "The benefit at this time of the year certainly helps retailers, since it is not spread evenly throughout the year."

Tom Kloza, chief oil analyst at the Oil Information Service, foresees the average price drifting down, as it typically does this time of year, to as low as $3.05 by year's end.

For retailers, the best-case scenario would be for the national average to breach $3 a gallon, a psychological barrier that could help accelerate spending.

Cheaper gas could help build on the momentum of 2 million more Americans finding jobs this year. It might also help shore up consumers' fragile confidence in an economic recovery that's lumbered along for 4½ years.

Riccadonna estimates that breaking $3 gas would lead the average shopper to spend $47 more over the holidays. That figure would translate into $15 billion worth of extra shopping — possibly the difference between lukewarm and red-hot sales growth.

Prices briefly dipped below $3 in five states — Arkansas, Kansas, Missouri, Oklahoma and Texas — before rising above that threshold again.

Some service stations have been charging less than $3 around Tucson, Ariz., where Seth Nilson, a high school teacher, and his wife, Cristi, are enjoying more time at restaurants.

"We have definitely gone out to eat more lately," Nilson said. "She tends to cook less when gas prices are low."

Many consumers think of gas prices in 50-cent increments, said Britt Beemer, head of the consumer behavior consultant America's Research Group. Based on his firm's research, shoppers would spend more freely if gas settles below $3 or $2.50. They would likely step up purchases at grocery stores or spend $35 on a gift instead of the $25 they might have planned, Beemer said.

"A 10-cent drop doesn't really change the equation much," Beemer said.

Still, smaller declines in gas prices matter, too, even if they don't register as clearly with consumers.

Economists say lower prices disproportionately benefit lower- and middle-income consumers who must commute to work. Cheaper gas makes their trips more affordable and provides the equivalent of a tax refund that frees up spending money.

Given the still-sluggish economic recovery, many shoppers are expected to tilt toward practical gifts, like gas station gift cards, said Pam Goodfellow of Prosper Insights & Analytics, who polled consumers for the National Retail Federation.

Her survey found that the average gift card this year is expected to be worth $45.16, up from $43.75 a year ago — for a rough total of $1 billion more. Twelve percent of shoppers say they intend to buy gas station gift cards this year, compared with 9.3 percent in 2010.

The potential economic boost comes at a low point for consumer confidence. Confidence was battered by the partial government shutdown and the troubled launch of President Barack Obama's health care law, which led insurers to cancel coverage for millions.

Many major chain stores have acted aggressively to generate sales. Macy's will open on Thanksgiving night for the first time in its history, while Wal-Mart kicked off its usual Black Friday discounts a week before the holiday.

More consumers have not only been turning to Internet retailers like Amazon.com. They've also been browsing store websites ahead of time so they'll need to make fewer stops at the mall. But this year may bring a wrinkle: Falling gas prices tend to cause consumers to drive to brick-and-mortar stores more frequently, increasingly the likelihood that they'll expand their shopping lists.

"They become less surgical in their shopping behavior," said Bill Martin, executive vice president of retail analyst ShopperTrak. "That opens the door to more impulse buying."

Lower gas prices also tend to encourage a big-ticket purchase that a growing number of Americans make during the holidays: cars. Steep discounts and aggressive advertising helped sales increase 9 percent last December to more than 1.3 million, up from an 8.7 percent increase in 2011, according to Autodata Corp.

Market data tracked by Edmunds.com found that the share of SUVs, crossovers and trucks sold has ticked up a few percentage points to 18 percent or more in December, compared with as low as 14 percent in spring, when gas prices usually spike.

Edmunds.com chief economist Lacey Plache expects a slightly more modest increase this December. But she said auto dealers are adopting the same strategies as big box retailers eager to lure customers at year's end.

"We've seen the rise of the whole Black Friday phenomenon," Plache said. "There's this mentality that all the good deals are available in the latter part of the year."

Many consumers also know that lower gas prices this time of year are usually short-lived. So holiday-time spending typically provides a temporary lift, a short-lived chance to enjoy a new restaurant or buy another stocking stuffer.

"Now, if gas went to 99 cents a gallon," said Allena Portis, an accountant in the San Francisco area, "that would mean something."

Comments

Pterocarya frax...

I CAN'T TAKE IT ANYMORE!!! YES, PERRY MASON... YES. I admit it. I did swipe the pack of gum from the dime store when I was 8 years old!

Contango

"YES"?

So the Bush Admin. DID manipulate gas prices?

How'd they do it?

"dime store"?

How in the h*ll old are you???

The Big Dog's back

Yes the bush administration manipulated energy prices.
http://www.larouchepub.com/other...

Contango

A Lyndon LaRouche website? lmao!!!!

So why can't Pres. Obama manipulate 'em huh?

The Big Dog's back

Because he's not a crooked and devious Repub. I notice you didn't say anything about the other site. The 1st one, larouche, was thrown out for humor.

Contango

Take it up with your pal Cupcake.

Pterocarya fraxinifolia writes:

"I know that gas prices are not determined by the White House,"

The Big Dog's back

Not the Obama Whitehouse, but they were under the bush regime.

Contango

Re: "Not the Obama Whitehouse,"

So why are some Nat'l prices under $3/gal.?

"Why Gas Prices Are Out of Any President’s Control"

http://www.nytimes.com/2012/04/0...

Have a nice day Sport.

Pterocarya frax...

Contango, that is a cheap trick and you owe me an apology for saying that I said that quote. If you look back at where you found that in my comment, it was in quotation marks, and immediately followed the comment where Darwin's Choice said it.

Shame on you.

Contango

You wrote:

"Even though you said in your first comment that you know the White House doesn't control gas prices, I am beginning to wonder if you do understand that."

So what DO you "understand" exactly?

Pterocarya frax...

Okay, so don't apologize then.

Contango

Re: "Okay, so don't apologize then."

Apologize for 'what'?

Either you agree with the statement or you don't. Which is it?

Pterocarya frax...

You attributed a quote to me that you know I didn't say.

Contango

Re: "You attributed a quote to me that you know I didn't say."

Just more deferring and deflection from the topic and non-answers to my questions.

Have a nice day Cupcake.

Pterocarya frax...

You might actually stimulate worthwhile discourse if you didn't continually call people belittling names, accuse them of saying things they didn't, and badger them with stupid questions.

Your mother must be so proud.

Darwin's choice

double post

Really are you ...

1. Create a feasible alternative to combusting fossil fuels. There is the all electric, but you have to stop and recharge, automobile.

2. There is nothing we can do but elect who holds the White House position.

3. When the automobile electrical generator that generates its own electricity comes out. Supply will increase and prices should drop.

Yes I am still working on a SSPEG, Self-Sustaining Personal Electric Generator. Working on a vehicular version and a household version. Its sole purpose is to generate zero emissions, completely harmless to humans and nature, and solve a big problem for our generations to come.

How much should a vehicle cost if you didn't need a combustion engine, gas tank, exhaust system, or alternator? But has a 70 pound watermelon size 3 phase AC motor and a SSPEG that will provide continuous power for hundreds of years?

Natural gas and household electrical power is suppose to be on the rise soon. Would you buy a house or have a house built with a SSPEG? The SSPEG will provide electrical power for that dwelling for you and generations to come. Is the amount of space to be taken up by this device a factor? How about big enough to fit in a closet. For generations of electrical power to be provided, how much would you pay? A Solar Panel System with batteries is roughly $30k. A Wind Turbine with batteries is roughly $20k.

Contango

Re: "When the automobile electrical generator that generates its own electricity comes out."

How does this not conflict with either the first and/or second law of thermodynamics?

Really are you ...

I had asked an engineer this same question. I asked him if I could get in trouble for breaking these "laws," he said no these laws can be broken. The way I see it these laws are what is keeping us in the stone age for electrical production.

Take Einstein's Law of Motion, this theory is good, until. Until you reach the speed of light, and then you have his Special Law of Motion. Electricity moves at the speed of light.

Darwin's choice

"and badger them with stupid questions."

"Your mother must be so proud."

Such a conversationalist........!!

Pterocarya frax...

"Such a conversationalist........!!"...said the guy that also said:

"Pfrax, you're a moron!" and
"You're still an azzhat.....democrat."

Darwin's choice

Hit a nerve?? Must be some truth to the comments.......

anthras

At one time Obama did say he thought that gas prices were too low

anthras

Re " Yes I know that gas prices are not determined by the White House"

In his April 25, 2008 speech in front of a gas station in Indianapolis< Obama promised he would lower gas prices if electedd, and blamed Bush and Cheney for the high gas prices.

I was just wondering was Obama ignorand or just lying ?

Contango

These lower prices are a part of the shale oil phenomena.

Remember: Oil and refining are two separate industries.

Over the yrs., most of the majors have sold off their stations and refineries - lower profit areas.

If you want REALLY cheap oil, ya gotta go back to the yrs. of the Clinton Admin. when oil briefly dipped below $10/bbl.

We'll never see those days again, since China is now the world's second largest oil consumer.

There's about a thirty day span between the rise or fall in the price of oil and the price of gas.

The Big Dog's back

What??????? No blaming Obama?

Contango

Re: "No blaming Obama?"

Other than him patting himself on the back for increased domestic oil production? No.

ladydye_5

All the talk of the "electric car" .....no one can answer my question. I have asked NUMEROUS people and lord knows car salesmen are mostly IDIOTS.....how much does my electric bill go up when I charge my car all night? Everyone knows that Toledo Edison is NOT cheap. They are already saying that electric rates will be going up again next year too! So are we just swapping out the price of gas for electric? If my electric bill goes up 100$ a month to charge my car every day.

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