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Low Gasoline Prices A Relief for Arkansas Consumers, Industry

4 min read

Analysts say gasoline prices are likely to stay at six-year lows through the end of the year, a boost for Arkansans’ pocketbooks and the bottom line of the state’s trucking and tourism industries.

With average prices hovering just above the $2 mark, the average consumer will save about $700 this year versus 2014, according to Gregg Laskoski, a senior petroleum analyst at GasBuddy.com, which tracks gasoline prices nationwide.

In the last month, average prices in Arkansas have declined 29 cents per gallon, Laskoski said. The steady slide has been mostly due to the low price of crude oil, which has been falling all year and now sits around $45 per barrel.

“The current supply [of crude oil] in the U.S. is at the highest that we’ve seen in 80 years,” Laskoski said. “Over the next several months we expect that gasoline prices will continue to decline but maybe not as rapidly through the remainder of the year.”

Another factor keeping prices low is retailers’ Sept. 16 switch to winter blend gasoline, which is cheaper to produce than the mandated summer blend that stations sell from May to September.

A continued glut of oil on the market, plus a cheaper blend, means welcome relief from last year’s per gallon average of $3.10. But with an extra $700 in their accounts, consumers aren’t mounting shopping sprees, according to Kathy Deck, director of the Center for Business & Economic Research at the University of Arkansas

So far, Deck’s research has noted no notable increase in retail sales. Instead, consumers are putting the extra money into savings accounts and paying off debt.

“I think I have been surprised that consumers have not spent more of their gasoline savings,” Deck said. “Particularly when the economy and job growth has been doing well as it has; they’re being more prudent.”

John Shelnutt, the administrator for Economic Analysis & Tax Research at the state Department of Finance & Administration, said Arkansas sales tax revenue has been strong, which means people are likely spending a little bit of their extra money.

But he’s not ready to attribute it completely to low gasoline prices.

“It’s above forecast, it’s elevated compared to recent years,” Shelnutt said. “That correlates but is not exactly a direct connection to low gas prices.”

Arkansans are, however, buying more gas now that it is cheaper.

Shelnutt noted that collections of the state’s gasoline and diesel taxes and petroleum environmental fee were up 6.5 percent in August compared to a year ago.

Consumer savings from low gasoline prices are certainly good for the tourism industry.

Richard Davies, director of the Arkansas Department of Parks & Tourism, said he’s observed a dramatic increase in this year’s tourism tax collections. 

The tourism tax is a 2 percent tax on hotel rooms, campsites, attractions admissions and marina rentals. Compared to last year, tourism tax collection has increased 8 percent. In July alone, it was up nearly 15 percent.

“Obviously, the low prices help relieve the pinch of gas prices from traveling on vacation,” Davies said. “But let’s say you commute to work a long way — if you’re spending less money on gasoline, you have more in your pocket to spend on something like travel.”

Davies doesn’t believe that low gas prices are leading people to travel out of state more, which could be considered a negative for the Arkansas economy.

“I think gas prices in the hospitality and travel industry can make an impact and it’s only positive,” Davies said.

The trucking industry is also happy about low gasoline prices.

Fuel generally accounts for 30 percent to 40 percent of a trucking company’s cost per mile, according to Shannon Newton, director of the Arkansas Trucking Association. 

“Fuel costs have consistently been a critical influence in the health of the trucking industry,” Newton said. “Stable or reduced fuel prices allow the industry to improve margins and operate more profitably.  Additionally, reduced fuel prices are generally associated with increased consumer demand, which translates to greater demand for freight movement.”

Shannon Everett, the CFO of Little Rock trucking firm Rich Logistics, said that he evaluates the price of diesel fuel each week and adjusts prices accordingly.

“From a profitability standpoint, we have the same margins we always have,” Everett said. “Who’s really saving right now is the shippers. Whether or not that’s being passed on to the consumer, we don’t know.”

Small businesses are also feeling relief amid low gasoline prices.

“Hypothetically, it’s very tough for small businesses to pass along higher increases in their prices when their costs go up,” Laskoski said. “A lot of those types of stores will try and hold off on raising their prices when the price of gasoline or other operating expenses increases.”

When prices are low, it allows business to leave their prices the same while making a greater profit. But Deck believes that consumers have grown accustomed to rollercoaster fuel price fluctuations.

“I think when consumers look at gas prices, there’s been enough volatility over a short period of time that they don’t believe low prices are forever,” Deck said.

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