Stimulus-by-the-gallon: Lower gas prices

Congress and the Federal Reserve aren’t likely to provide any meaningful stimulus to the economy. But your corner gas station might.

The average gas price has come down about 40 cents, or 10%, since the peak near $4 a gallon in early April. With U.S. drivers expected to use about 133 billion gallons of gasoline this year, the 40-cent price break works out to about $53 billion in annual savings if it were to stay in place for a full year.

 “Just as an increase in gas prices is essentially is a tax on consumers, a decrease in prices acts as a tax cut,” said Brett Ryan, economist with Deutsche Bank.

The government report on retail sales earlier this week estimates Americans spent about $1 billion less at gas stations in May than they did in April, and that decline is likely to continue when June numbers are reported.

Lower gas prices was enough to cause a decrease in overall retail pricespaid by consumers in May compared to April, the first such decline in two years.

To be sure, some of the decline in gas prices is due to weakness and worry about the economy. Traders worried about a recession in Europedue to the sovereign debt crisis and a slowdown in China have driven the price of a barrel of oil sharply lower in recent months.

Economists worry that those economic headwinds could overwhelm the positives of lower energy prices, as they cause consumers to pull back on their spending.

“A drop in gasoline prices obviously helps with consumer finances, said Bernard Baumohl of the Economic Outlook Group in Princeton, N.J. “However, even with the drop in gasoline prices, consumers don’t seem as much in a spending mood as they were earlier this year,”

To read more, visit: Gas Prices – CNN Money