Few noticed when gas prices began their tailspin the week of September 8. The weekly average price of regular gasoline fell a fifth of a cent to $3.457 per gallon that week. If your gas station was consistent with the national average, there weren’t folks lining up at the pumps and the price you paid probably didn’t change.
But the steepest drop in fuel prices since 2009 had begun. On September 15, prices were down 5 cents; a week later, another 5 cents. What began as a $0.002 dip eventually turned into a 19-week streak of plunging prices. On January 26, the apparent seafloor after the price dredging, national fuel costs averaged $2.04 a gallon, 38 percent lower than a year prior and 45 percent lower than in June. In Seattle, prices averaged $2.23 a gallon at their lowest. Prices have risen over the past month — Seattle-area fuel is retailing for $3.00 — but the preceding plunge wasn’t an apparition.
Graphic by Mike Forbush
Economists, columnists, and television talking heads were predicting the price drop would help boost the consumer economy. Fuel is considered an inelastic commodity — one in which demand remains fairly constant despite supply or prices — so every dollar saved at the pump was a dollar to be spent at a local bar, clothier, or grocery store. And the timing couldn’t have been better, as the dip in prices corresponded with the holiday shopping season.
But a strange thing occurred. U.S. consumer spending in December, when everyone should have been taking their gasoline savings and funneling it toward Christmas presents, fell 0.9 percent, the first drop since January 2014 and the largest drop in five years. Cheap fuel, the “tax break” that was supposed to send droves of people to the mall, produced no increase in spending whatsoever. The trend continued into 2015: spending dipped 0.8 percent in January and 0.6 percent in February, indicating more Americans were pocketing their fuel savings than expected.
More money has been flowing in King County. The county’s year-over-year taxable retail sales grew 10.7 percent in September, 7.6 percent in October, 6 percent in November, and 7.7 percent in December, the most recent data available. But as of March, local shop owners said they haven’t experienced unusual bursts of sales since fuel prices fell.
Tipsy Cow owner Keith Mourer. The restaurant had its best month ever in January, but Mourer is unsure of fuel prices’ role. Photo by Rachel Coward.
“Sales are up, which is great, but I’m not sure how much to attribute to fuel prices,” says Keith Mourer, owner of Tipsy Cow Burger Bar in Redmond and Brix Wine Cafe in Kirkland. January was Tipsy Cow’s best month ever, he says, and Brix’s sales growth wasn’t abnormally large. Tipsy Cow’s January haul was unusual, particularly during what is usually a slow month for restaurants. Mourer thinks gas prices played a role, but not as great as the Seahawks’ playoff run and the improving economy as a whole.
With no abnormal spikes to point out, it’s difficult to credit fuel prices for any increase in the area’s retail success. Mourer puts it this way: He saves $40 filling up his vehicle compared with a year ago, but that’s not enough to take his family out to dinner or to buy a new outfit.
While nationwide retail growth has been meager, retailers offering groceries have fared better. Costco’s non-gasoline January sales in the U.S. were up 7 percent year-over-year. Kroger reported a 5.6 percent jump in non-fuel sales in the quarter that ended in November. Grocers with fuel stations, such as many Kroger and Costco locations, offer an extra draw for consumers, even though low fuel prices can mean lower margins for retailers.
“A big part of the savings from fuel means people are thinking less about it,” says Amanda Ip, spokeswoman for Kroger’s Northwest properties. She says year-over-year fuel sales by volume are up 10-15 percent, so “people are clearly using their vehicles more and driving more than they have been.”
In the humming Puget Sound economy, fuel prices alone haven’t triggered a noticeable difference at shops and restaurants, which many believe is a good thing — it’s better for spending in a market to be dictated by consistent income, not variable expenses. So the greatest effect of cheap gas might be psychological — since consumers are saving money at the pump, they might not worry as much about an extra road trip or a few more cups of coffee.
Eastside livelihoods don’t rise and fall with the volatile commodity, and that’s a good thing. But to say the region is insulated from fuel prices is naive; if the local economy were worse off, many more Eastsiders would be utilizing every last drop of savings.