Most of us received an early Christmas in the form of a price we see almost every day: gas prices. In some markets, prices have tumbled to their lowest level in three years. N.C. State University economist Mike Walden takes a look at the cause of this good news.
“… I want say that this is, indeed, a big help to the economy. You can think of higher gas prices almost as a tax in the sense that, when we pay more at the pump, that money immediately flows out of the local community. It really doesn’t go into anyone’s hands locally. So a lot of it actually goes overseas. So it’s money that we lose.
“So to the extent that gas prices are coming down, that means that we have more money in our pocket to spend. So this is very important for the overall economy.
“Now you’re right. Gas prices are down there down to about a three-year low. The reasons seem to be multiple. One has to do with the lower price of oil. We’ve seen oil go down on trend over the last couple months. Economists think that about one-third of the drop in gas prices is due to lower oil prices.
“Also a seasonal impact: People tend to drive less in the winter, and that tends to send gas prices down. So we tend to see this factor all the time, but still we have another factor going on …, and it has to do with the fact that, I think, people have changed their driving habits.
“We’ve actually seen a drop over the last five years in average miles driven per household. I think people are responding to the fact that gas prices, although down recently are still much about we got used to. I think this is going to cause a permanent change in the gas price market.”