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By New_Deal_democrat October 17, 2014 7:29 am
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US gas prices at lowest in nearly 4 years

According to GasBuddy, nationwide gas prices in the US now average $3.15.  This is a 3 year 8 month low (i.e., the lowest since February 2011):

 

 

Just pennies, right?  No.  There are 250 million vehicles in the US, averaging 24 miles per gallon, and typically driven over 11,000 miles per year.  A drop of just 5 cents YoY averaged for a year (the YoY decline overall so far in 2014) adds over $6 Billion in disposable income that can be saved or spent for other purposes by US consumers.

 

The next graph shows US gas prices as a share of disposable income through August (the last month we have income data):

 

 

Gas prices have declined about 10% since then.  If disposable income simply has held steady for the last two months, that will mean US consumers are now spending less on gas since they have in late 2009 and 2010.

 

This is going to be a boon for US consumer spending. And if typical seasonal gas price patterns hold, we are still 1 to 3 months away from the bottom.

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