Tags: gas | price | 40 billion | consumers

Deutsche Bank: Gas Price Slump Could Put $40 Billion in Consumers' Pockets

By    |   Thursday, 16 October 2014 09:27 AM

Falling gasoline prices could mean a windfall for consumers — to the tune of $40 billion, say economists Joseph LaVorgna and Brett Ryan of Deutsche Bank.

They write in a commentary obtained by CNBC that every 1-cent drop in gas prices means an extra $1 billion in consumers' wallets. With retail gas prices dropping to $3.30 a gallon as of Oct. 6 from $3.70 in June, that amounts to $40 billion, the duo writes.

Prices have since fallen further in the last nine days — to $3.18 Wednesday. So perhaps another $12 billion windfall awaits consumers.

The low gasoline prices, of course, are a direct result of the steep drop in the price of oil. November West Texas Intermediate crude futures hit a two-year low of $80.01 a barrel Wednesday on the Nymex.

On Friday oil prices rose slightly, but were still down 4 percent for the week on prospects of lower demand from a slowing global economy and high supplies.

Benchmark U.S. crude rose 5 cents to close at $82.75 a barrel on the New York Mercantile Exchange. Brent crude, a benchmark for international oils used by many U.S. refineries, rose 34 cents to close at $86.16 on the ICE Futures exchange in London.

Sluggish global economic growth has helped spark the downturn. While the U.S. economy expanded at an annual rate of 4.6 percent in the second quarter, the eurozone posted zero growth, and Japan's economy contracted 7.1 percent.

Meanwhile supply is jumping, with U.S. oil output at its highest level since 1986. And various OPEC members, including Saudi Arabia, have recently cut prices.

So how might the plunge in oil prices affect Federal Reserve policy?

"Cheaper oil is a good thing for the U.S. economy overall, but may be a reason the Fed errs on the side of keeping [interest] rates low or raising them more slowly," Andrew Kenningham, an economist at Capital Economics, tells Bloomberg.

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Falling gasoline prices could mean a windfall for consumers — to the tune of $40 billion, say economists Joseph LaVorgna and Brett Ryan of Deutsche Bank.
gas, price, 40 billion, consumers
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2014-27-16
Thursday, 16 October 2014 09:27 AM
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