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The American Consumer Is On Track To Save $40 Billion In Annual Energy Costs

Oct 14, 2014, 22:46 IST

Americans will be very happy if the recent drop in gas prices is maintained.

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According to Deutsche Bank's Joe LaVorgna, every one cent change in the price of a gallon of gas is worth approximately $1 billion in annual US household energy expenditures.

Since June, retail gas prices went from around $3.70 per gallon down to $3.30 on October 6. By LaVorgna's estimate, consumer cash flow will be juiced by an approximate annualized rate of $40 billion.

"This is equivalent to almost three-tenths on annualized GDP growth," LaVorgna notes.

As you can see in the chart, there's a very tight correlation between the change in retail gas prices and the change in household energy consumption.

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In 2009, gas prices fell by 91 cents, and household energy consumption was down by $105 billion. Then in 2010, gas prices rose by 44 cents and the energy consumption went up by $49 billion.

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