On Sunday, the average gallon of gas in Maine cost $2.27, down $1.17 from one year ago.
The surprise global drop in crude oil prices has broad implications internationally and raises specific challenges for domestic gas and oil producers, but a new report gives a sense of the average benefit for the approximately 506,191 Maine households with cars (according to the latest census survey, from 2014).
The new report from the JPMorgan Chase Institute put hard numbers to the impact of lower gas prices, by state and county, using data from about 25 million anonymized credit card customers.
The report compares spending on gasoline for the most recent winter (December-February) with the same period for 2014.
The conclusion: the average household will have about $700 more to spend this year and they will spend about 80 percent of that on things other than gasoline (about 20 percent of savings, the report found, was spent on restaurants).
“With lower gas prices expected to last through the year, this extra disposable income is fueling consumer spending on categories other than gas,” the authors of the report, drawn from a pool of 57 million Chase card customers, wrote in a summary of the findings.
The impact for Maine is on the higher side. The study found Maine and New Hampshire were among the top 10 states — mostly in the South and Midwest — ranked by total gasoline spending.
(All of the bottom 10 states for total gasoline spending, the study notes, are in the East and West, except for Virginia and South Carolina.)
Three of Maine’s poorest counties — Somerset, Piscataquis and Washington — were among those where average monthly spending on gas dropped the most from the winter of 2014 to the winter of 2015.
The study found changes in gas prices have a larger impact on young people and low-income households, with average savings equalling more than 1 percent of monthly income for households making less than $30,000.
Statewide, the data showed average monthly gas expenditures in Maine dropped by more than $30 in the winter of 2015, compared the previous year. As the price and total spending fell, the report estimated that gasoline consumption increased.
In aggregate, the study notes that the change in pump prices represents a small share of consumer spending with impacts “easily overshadowed by other economic forces.”
But the comparison with last year, the report states, shows the different impact changes in gas prices have by region and by income level, informing wonky discussions of gas tax policy, transportation policy and financial services.
On transportation, the report concludes: “…gas price fluctuations contribute to spending volatility. Reduced reliance on gas, for example through electrification of the transportation sector, could reduce volatility particularly for low-income earners.”
On financial services: “…innovative financial services could assist consumers in hedging gas price volatility. For example, to assist consumers in saving, credit cards (e.g. especially gas rewards cards) could develop a savings feature that activates when gas prices drop.”
And on tax policy: “These state-level differences provide a more granular understanding of how gas price fluctuations impact regional economies and should inform good decisions about optimal gas tax rates and structures.”
Check out the full report here: