Sarah Edwards drives 40 miles each way to work, her 1998 Jeep Cherokee burning through at least one tank a week. Filling up cost her $65 just a few months ago, but last week she replenished the tank for $53.
“Twelve dollars a week may not sound like much, “ said Edwards, who lives near New Bedford but works in Marshfield. “But when you’re 22, it makes a big difference between staying home and going out.”
Edwards is among the millions of consumers enjoying the benefits of plunging gas prices, which on Monday fell below an average of $3 a gallon in Massachusetts for the first time in four years, according to AAA Southern New England. Since prices peaked at the end of June, the state average price for unleaded regular has plummeted nearly 75 cents a gallon.
That is taking pressure off family budgets at time when wages are barely growing and providing a boost to a US economy driven by consumer spending. Chris Lafakis, an economist at Moody’s Analytics in West Chester, Pa. estimated that savings from lower gasoline prices so far has put as much as $60 billion into consumers’ pockets -- the equivalent of the household tax credits approved as part of federal stimulus measures during the last recession.
“That’s not chump change,” Lafakis said.
Lower gas prices are another piece of good news for an economy that has broadly improved this year. Then nation has added at least 200,000 jobs in each of the last nine months and the unemployment rate has declined to 5.8 percent, the lowest in more than six years. Consumer confidence last month jumped to its highest level since 2007, which analysts attributed in part to falling gas prices.
Chris Christopher, an economist with the consulting firm IHS Global Insight, has estimated that each 10 percent decline in gas prices pushes a leading index of consumer confidence up by 1.5 percentage points. Rising confidence often leads to more consumer spending, which bodes well for retailers heading into the holiday shopping season, said Richard Curtin, the economist at the University of Michigan who oversees the consumer sentiment study.
“Consumers are becoming more confident in their own economic situation and that of the economy as a whole,” said Curtin.
Nicole Carloni, a master’s student at Boston University who drives to her parents’ home in Rhode Island every weekend, said lower gas prices are saving her $10 to $15 a month, hardly enough for her to notice the difference. Still, seeing gas prices below $3 a gallon up and down the highway gets her attention -- and gives her a bit of kick when she pulls into a station.
“I haven’t seen those prices in a long time,” said Carloni.
Local gas prices
Weekly gas prices in Massachusetts, for regular, unleaded, self-serve gasoline.
DATA: AAA Northeast
The good news at the pump has followed the plunge in the price of crude oil, which accounts for most of the cost of gasoline. The combination of weaker global demand and increasing supplies, largely due to the US production boom, have push crude prices to their lowest levels since 2010, when the global economy was still emerging from a deep recession.
Crude pries have dropped 28 percent since June, to less than $78 a barrel from $107.
Since most of the money spent on petroleum products flows out the United States to foreign producers, savings at the pump means more money stays here to support the domestic economy, said Christopher Knittel, an energy economist at MIT. “That leads to economic growth,” he said.
Gasoline accounts for just a small part of household expenses, about 5 percent, according to the Labor Department. Rising costs in other parts of the household budget, including food and electricity, may blunt the impact of falling gas prices.
For many consumers, lower gasoline prices may not feel like a big deal. Jim O’Connell, who lives Worcester and works at Rhode Island television station, said his commute is long, but his Volkswagen Golf sips gas, and he figures he and his wife combined spend about $150 to $200 a month on gasoline. He said the savings from the recent price declines -- about $30 a month -- mean he might buy his morning coffee at the convenience store on the way to work instead of making his own, saving him a couple minutes each day.
It may not seem a lot to O’Connell. But chances are, other commuters are finding enough change in their pockets to buy a cup of coffee. And that’s making a lot of convenience store owners happy.
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