Americans have ‘saved’ about $178bn at the pump. Where did the money go?

Gasoline prices have drifted back lower since June and even though summer vacation is over and the kids are back at school, Americans are driving more again. For many, driving is recreation and that means demand responds quickly (is 'elastic', in the jargon) to price changes. With prices down some 38% compared to 15 months ago, Americans have 'saved' about $178bn (1% of GDP) at the pump. Where did the money go? About half of it was blown right back out the exhaust pipe - spent on more gasoline. Gallons consumed have risen by some 28% over the past 15 months. The economy may not be cruising but someone is. 

Where did the other half go? Hard to say. It doesn't appear to have gone into savings - households haven't deleveraged much, if at all, for the past three quarters. Some of it went to buy new cars (or, more precisely, sports trucks) to go with the cheap gas - motor vehicle sales are up by 6% YoY in August. And some of it was spent on nights on the town - restaurant tabs are up by nearly 9% YoY. But except for driving and eating out, though, nothing else in the retail sales space is making waves. Control group sales, which feed into the consumption data in the GDP accounts, continue to grow at a 3.5% pace, or about 2% in real terms, essentially unchanged from the past four years. 

It's a very James Dean kind of response: you stumble upon an extra 100 bucks and you spend it on cars, gas and burgers at the drive-in. Better hope Mom doesn't find out.