If there's a silver lining to recessions, it's that things get stupidly cheap. And I'm not just talking about stocks; I recently booked a round-trip flight from Los Angeles to Washington, D.C., for $206. Bargains are everywhere you look, which can be a boon for consumers reaching for relief. It's like a stimulus package you never hear about.
This is especially true with regard to gasoline. Last summer's voyage to $4 gas, followed by a nosedive to less than $2 a gallon, created a massive stealth stimulus package for consumers and businesses.
Just how massive? I consulted data from the Energy Information Administration to get a better understanding. Using a few (admittedly cherry-picked) dates, here's the difference in the daily cost of nationwide gasoline consumption:
|
Date |
July 2007 |
July 2008 |
December 2008 |
March 2009 |
|---|---|---|---|---|
|
Gasoline Consumed (gallons per day) |
405 million |
381 million |
375 million |
372 million |
|
Nationwide Average Price per Gallon |
$3.05 |
$4.05 |
$1.65 |
$1.89 |
|
Total Price |
$1.23 billion |
$1.54 billion |
$617 million |
$702 million |
These are staggeringly vast savings. The difference between what we spent on gasoline last summer compared to this spring is roughly $840 million a day. Annualized, that's $306 billion a year, or nearly half the size of both the TARP bank bailout and President Obama's multiyear stimulus package.
Of course, gasoline is simply one byproduct of oil. When we broaden the scope to crude oil in its entirety, the savings are even more impressive:
|
Date |
July 2007 |
July 2008 |
December 2008 |
March 2009 |
|---|---|---|---|---|
|
Barrels of Oil Consumed per Day |
20.7 million |
19.4 million |
19.2 million |
18.7 million |
|
Average Price per Barrel |
$73.44 |
$135.55 |
$38.73 |
$42.91 |
|
Total Price |
$1.52 billion |
$2.6 billion |
$743 million |
$801 million |
The annualized difference between what we spent on oil last summer compared to this spring is $657 billion per year. That's almost five times the market cap of either Google
Don't start screaming "green shoots" just yet
But as you've probably noticed, oil and oil products are starting to spring back in a big way. Oil has nearly doubled in price since January, and gasoline has surged about 50%. Some of this rise might be independent of an actual economic rebound, since supply cuts and investment cancellations by OPEC and private energy companies can (and probably will) overshoot. We had a demand bubble last year. We could just as easily have a supply antibubble going forward. Both push prices higher. Neither is very fun.
And while the likes of ExxonMobil
That's where things could get dicey, especially when it comes to consumer confidence. You see, the effect plunging gas prices has had on consumers -- while massive in dollar terms -- probably wasn't appreciated as much as it should have been. Why? Because wealth destruction in housing and the stock market has eclipsed its benefit. The joy of cheap gas shrivels when headlines remind us of ravaging unemployment and the meltdown of Citigroup
Stealth stimulus, flagrant hindrance
Not surprisingly, these forces don't work the same way in reverse. While lower gas prices were largely ignored as something we deserved -- if not considered insignificant in the grand scheme of things -- consumers will doubtlessly feel that higher gas prices are an infuriating obstruction to economic recovery. People will feel nickel-and-dimed. They'll be upset. They'll lose confidence. This is a common theme in behavioral economics, where losses are substantially more painful than gains are pleasurable.
If economic recovery is met with an equally challenging bout of inflation, this subject will be of top importance in the years ahead ... and not in a good way. But hey, I guess that's just life for a country (still) heavily addicted to oil.
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