Gulf Oil CEO Joe Petrowski recently noted dramatically lower gas prices would essentially be similar to a rebate check for consumers. The drop may even help ease the country out of the recession. He's right.
Gulf Oil CEO Joe Petrowski, who wrote his Harvard thesis on the oil business, recently noted dramatically lower gas prices would essentially be similar to a rebate check for consumers. The drop may even help ease the country out of the recession.
"The price of oil has a tremendous impact on discretionary consumer spending. I think it hurt us tremendously during July and August," Petrowski said. That's when pain at the pump prompted motorists to cut back their travel by 9 percent.
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He’s right. And a good portion of that “rebate” is likely to be spent in convenience stores -- in fact, there’s a lot better chance of that fuel savings being spent in a convenience store than another government rebate check.
When the government issued its last economic “stimulus” checks last summer, convenience retailers saw little benefit. Gas prices were sky high, discouraging in-store sales, and many consumers simply banked the checks as they began to fear for their jobs as the economy struggled. The ones who did spend the checks used them for either everyday groceries (some benefit to value-oriented food stores like supercenters) or bought big-ticket electronics like LCD TVs.
Lower prices at the pump should have a positive impact on convenience stores’ inside sales. For example, at CSNews headquarters in New York City, the average gas price last summer was $4.35 per gallon for unleaded regular. Today, it’s about $2.10 per gallon. I put about 10 gallons of gas in my car a week, so instead of paying $43.50 to fill my tank, today it only cost me $21. That’s $22.50 extra that I can spend on a hoagie, a slice of pizza, a six-pack of beer, a candy bar or two. And that’s just $22.50 per week. If gas prices stay low through the first say, five months of 2009, as many expect them to, that’s a savings of $562. Not quite as much as the rebate check, but it’s $500 that is more likely to find its way into c-stores’ cash registers.
That’s the type of handout I can support. It would do a lot more good to the nation’s overall economy than providing a bail out to the auto makers!
-- Don Longo
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