Economy Watch: Slumping Gas Prices Good News for Retailers

With gas prices expected to fall in the next few months, the more consumers will likely spend on other things, which is good news for retailers.
Image courtesy of commons.wikimedia.org.

Image courtesy of commons.wikimedia.org.

Another good-news report for retailers ahead of the retail sales numbers coming late this week: the Energy Information Agency expects the retail price of regular gasoline to average $2.19 per gallon during the 2016 summer driving season (April through September), 6 cents per gallon lower than it projected in last month, and 44 cents lower than the average in summer 2015.

Not only that, the EIA expects that the U.S. average retail price of regular gasoline, which reached a peak of $2.37 per gallon in June, to fall to an average of $2.05 in September. And then it will fall to an average of $1.92 in December.

Concerns about future economic growth related to the U.K.’s June 23 vote to exit the E.U., along with the easing of supply disruptions in Canada, contributed to falling oil prices on international markets in late June. Prices continued to fall in July because of high levels of U.S. and global petroleum product inventories, despite relatively strong demand, and because of growing U.S. oil rig counts.

The less consumers need to pay for gas, especially as the peak driving season ends and the holiday shopping season begins, the more (in theory) they’ll have to spend on other things. Retailers can probably take some comfort from that, unless they sell the sort of goods that are increasing bought online (e.g., electronics) or they belong to an outmoded retail model (e.g., department stores).