Probably the biggest global economic story since the collapse of the credit-based global economy in 2008 is the implosion of petroleum prices, which has had a direct, if lagging effect on retail sales in the U.S.

As of this writing, the price of a barrel of crude oil has recently gone below $45. The global economic situation is volatile enough to potentially reverse this trend, however, for the moment the  benefit remains with the consumer. Thus it’s worth taking a look at the economic and spending behavior that follows oil price declines because it has implications for business and industry across the country.

And not just in the U.S. The short-term positive effect of lower oil prices will at the very least put some money in global consumers’ coffers. The US Energy Information Administration estimates that the U.S. burns through 19 million barrels of oil per day, including 8.6 million barrels of gasoline per day. China checks in at 10 million barrels of oil a day including 2.3 million barrels of gasoline. At an aggregate level there could be a significant impact on consumers’ spending power due to lower prices
The correlation to increased consumer spending may be direct, but it is not linear. It is possible to measure the savings and to look at individual retail sector recipients of the consumer spend.  In economics, the factor of time is at least as important as the economic change itself. The effects of the significant drop in oil prices took about two months to be seen in the retail sales figures in 2015.

In the U.S., gasoline spending represents 12 percent of total retail sales, excluding automobiles. And regular gasoline prices for the week ending April 3, 2015, averaged $2.42 per gallon, fully 32.0 percent below where they were a year previous, a meaningful and viable savings for consumers. That week’s consumption of gasoline was up only 5.7  percent versus a year earlier, which means that the consumer is in fact pocketing the difference in lower prices. Of course the individual savings depends on the variable of gasoline consumption per household.

Total U.S. retail sales excluding auto and excluding gasoline in March 2015 were up 4.8.percent year-over-year with almost every retail sector within the report evincing growth, especially on discretionary spending such as travel, restaurants and jewelry. This contrasts with February 2013, when gasoline prices rose 36 days in a row. Combine this with the payroll tax increase that hit at the beginning of 2013, and the consumer impact on total retail sales was negligent, with retail sales only growing  at a mere 0.5 percent.

By comparison, it seems that the U.S. consumer, upon whom so many businesses around the world pin their hopes, may be putting some gas dollars in retail and not the car tank. But this is not just a U.S. story, consumers around the world in both developed and developing markets are getting this same savings dividend and we expect we will see the same spending behavior.