With the recent crash of gas prices, consumers have found themselves with hundreds of extra dollars to spend. A new report by the JPMorgan Chase Institute sheds some light on what we’re spending it on.
“The Consumer Response to a Year of Low Gas Prices” examined data from 1 million anonymous Chase customers in 23 states to determine how low gas prices affected consumers across all income levels.
In 2015, gas prices were 25 percent lower than in 2014. For middle-income households, this meant they had close to $630 extra dollars to spend—equivalent to a 1 percent increase in income for most of these households, a significant benefit.
The JPMorgan report also shows that the drop in gasoline prices least affected households in the West and Northeast. Residents of Indianapolis, Tucson and Dallas-Fort Worth saw the largest drops in gas spending, while those in Los Angeles, New York City and San Francisco experienced much smaller savings, likely because of stricter regulations and higher fuel taxes in California and New York.
With the money they saved from lower gas prices, however, many consumers fueled up more often. On average, almost a quarter of savings from low gas prices was spent on more gasoline. Unsurprisingly, consumers also spent less on transit as driving became a more financially attractive option.
But the majority of savings from low gas prices went to restaurants, retail, and groceries — giving consumers an extra bonus for life’s daily necessities.
This additional spending (including gas and non-gas items) only adds up to 58 percent of the savings, however. Unfortunately, it’s difficult for JPMorgan to measure where the other 40 percent of savings went, since the study only relies on credit card data. Some expect that consumers bought more vehicles or durable goods, while other evidence indicates that consumers might actually be saving more.
Regardless, it’s clear that low gas prices have brought direct relief to consumers. And low gas prices have also had a number of indirect benefits as well.
Airlines, for example, have seen near-record profits as a result of low gas prices. Though fares have only seen a small decrease, airlines are also reinvesting into their businesses. American and United, for example, matched rival Southwest by offering free snacks on planes, and more airplanes now integrate power outlets, TV screens, and Wi-Fi into the flight experience.
It’s also possible that Uber’s success has been fueled (pun intended) to some degree by low gas prices, too. As drivers pay their own refueling costs, low prices have made it possible for Uber to keep prices low, attracting new customers, even as drivers continue to make enough money that the service is worth it for them. If gas prices start rising quickly, Uber may have to increase its fare rates or drivers may decide that driving doesn’t pay off.
Low gas prices undoubtedly have complex economic causes and effects around the world. But for most American consumers, 2015 just brought a bit of relief.