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Study Finds Current Low Oil Prices Lead Consumers To Spend On Retail, Restaurants

Customers pump gas at the OnCue Express at Interstate 35 and S. Fourth Street in Moore.
Brent Fuchs
/
The Journal Record
Customers pump gas at the OnCue Express at Interstate 35 and S. Fourth Street in Moore.

A new study from JP Morgan Chase found that low gas prices led most consumers to spend their money on restaurants and retail, rather than increasing savings or paying down debt.

Oklahoma City’s drop - as a portion of income – was three or four times greater than many other large metro areas, even when regional price differences are factored in, The Journal Record’s Brian Brus reports:

Oklahoma City ranked in the top 10 metros with an average decline of 1.2 percent in fuel spending between 2014 and 2015. By comparison, residents in Los Angeles realized a savings of only 0.3 percent, and New York residents had a 0.4-percent drop. The study found middle-income households nationwide spent about $480 less on gas in 2015 than in 2014, and then turned around and spent more than $200 of that savings to dine out or shop. About $150 of the extra money went back to the stores selling gasoline, suggesting they bought a higher fuel grade or more product.

Read the JP Morgan Chase Study "The Consumer Response to a Year of Low Gas Prices"

University of Oklahoma economist Robert Dauffenbach wasn’t surprised by the findings, and said even though the difference is small, retail sales have been improving.

From Brus:

How small windfalls are incorporated into normal spending suggests bigger habits at work.

“Milton Friedman, who won a Nobel Prize for his work in macroeconomics, suggested in his research on permanent income that people don’t spend windfalls,” he said. “They tend to consume on the basis of what they believe their permanent income to be.” “A lot of us are tied into a lifetime of savings and spending habits,” he said. “Of course, when I get a windfall, I spend some of it.”

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