"Gasoline for $5 a gallon?"
The New York Times wrote in February. "The possibility is hardly far-fetched."
It's still not far-fetched, but odds of seeing $5 gas this summer are dwindling. Oil prices have dropped 9% since February, and the nationwide average cost for a gallon of gas has dipped to $3.71 down from around $3.90 earlier this year, according to the Energy Information Administration. The EIA now expects nationwide gas prices to average $3.79 this summer, down from its old forecast of $3.95 (though the fact that its old forecast was revised shows how fickle these predictions can be). Few are talking about $5 gas anymore. Four bucks might now be a stretch.
The savings that offers U.S. consumers can't be understated. U.S. drivers consume about 344 million gallons of gas a day. If gas prices average $0.25 less this year than originally forecast, the savings adds up to $32 billion, or about $260 per household. That's real money.
Gas prices are still high, of course. If you take average nationwide gasoline prices and adjust them for disposable income per-capita, you get this:
Source: EIA, Federal Reserve, author's calculations.
By this metric, real gas prices are below 2008 levels -- and well below levels seen in the late 1970s -- but still 30% above the long-term average. If gas prices today were what they were in 2000, the average American household would be saving about $2,500 a year.
But even with high gas prices, consumers have been able to keep their spending up without much of a hiccup. Analysts worried earlier this year that a e in gas prices would cause consumer spending on things like restaurants and travel to drop. By and large, it didn't. Growth in consumer spending was one of the only bright spots in last quarter's GDP report. Retail sales are still growing nicely. Why haven't higher gas prices slowed us down?