"I pointed out that while markets obsess over gold, silver, or even stock prices, gasoline directly affects daily life. For the average American family, fuel costs can approach $3,000 a year. When that number falls, discretionary income rises almost immediately. Lee agreed that this shows up clearly in recent CPI data, where energy prices have been one of the few components falling sharply."
"We emphasized that consumer spending drives roughly 80% of U.S. GDP. Lower gasoline prices act like a tax cut, freeing up cash for other spending. Whether it is commuting, taking kids to activities, or heating homes in colder states, fuel costs touch nearly every household budget. In much of the South, gasoline prices are already near or even below $2 per gallon, largely due to proximity to refineries and lower taxes."
The national average price for regular gasoline has fallen to about $2.75 per gallon, increasing household discretionary income and reducing the energy component of CPI. Annual fuel costs for the average American family can approach $3,000, so lower prices free cash for other spending. Consumer spending makes up roughly 80% of U.S. GDP, so falling gasoline costs act like a tax cut and can boost economic activity. Regional variation is large: many Southern states see prices near or below $2 due to refinery proximity and lower taxes, while California’s prices exceed $4 because of high state taxes. Lower gas prices weaken the economic case for electric vehicle adoption.
Read at 24/7 Wall St.
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