U.S. consumers should expect to see lower propane, natural gas and gasoline prices this fall and winter as the market continues to deal with a supply glut, analysts say, but the extra cash in consumer checking accounts is still going to savings and to pay down debt, and not back into the retail economy.
An abundant supply and sluggish demand sent commodity prices, especially oil, plunging this year, allowing for hundreds of dollars in savings for American households.
"We still see a retail sales growth rate more muted than we would expect," said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville.
"Even though [low fuel prices are] a good thing for people's budgets ... I don't think there is this expectation that energy prices will remain low forever, and [there is] a reasonable amount of caution," she said.
Retail sales got a small lift in August but are more subdued than many analysts and economists expected to see this year as energy costs dropped, particularly gasoline prices.
Sales at retail stores and restaurants in August rose 0.2 percent compared with July, the U.S. Commerce Department said Tuesday. Revised numbers showed sales were up 0.7 percent in July.
Economists point to stagnant wages to explain why consumers aren't spending more of their extra money.
"The real key to increasing consumer spending is real income growth," Deck said. "But it is a good thing for consumers to face lower prices on energy. It also allows them to save it or pay down debt, which is also helpful for peace of mind as well."
Wages have not caught up with the cost of living, said Rob Lutts, president and chief investment officer for Cabot Wealth Management.
Lower gasoline prices are expected to save the average American household more than $700 this year, according to the U.S. Energy Information Administration. The agency expects the national average price at the pump to drop to $2.03 a gallon by December.
The average price of gasoline Tuesday in Arkansas was $2.07 a gallon, down from $3.17 a year ago. The national average was $2.32 a gallon, compared with $3.39 in 2014.
On top of lower gasoline prices, people who use propane and natural gas to heat their homes should see lower prices this year, analysts said.
Propane wholesale prices should remain at current levels -- about 40 cents per gallon -- for rest of the year, said Jennifer Van Dinter, manager of energy analysis at Bentek Energy, an arm of Platts. A year ago, the wholesale price for propane was about $1.08 a gallon.
The amount of propane in storage is 50 percent above the five-year average.
Prices could be pushed higher if there is a very wet corn crop and unusually cold winter, Van Dinter said. Propane is used to heat homes and water, dry grain crops and power generators.
"But we don't think crop-drying demand is going to be anywhere above normal," said Peter Fasullo, principal at EnVantage Inc. "You should see favorable pricing for propane and natural gas this winter."
Spokesman Alicia Dixon said CenterPoint Energy has not yet adjusted its bills for winter, so the company does not know whether bills will be lower this year. The company will make the adjustments in October for November bills.
"The good news is overall natural gas prices continue to be low and stable," Dixon said.
Ample supply has kept natural gas prices low this year, said Phil Flynn, an energy analyst with Price Futures Group.
Natural gas prices Tuesday in New York trading fell 3 cents, or 1.1 percent, to $2.73 per 1 million British thermal units.
"Coming into this winter, natural gas prices are starting at a historically low point," Flynn said.
Natural gas in storage Aug. 28 was at 3.1 trillion cubic feet, up 18 percent from a year ago and 4 percent higher than the five-year average, according to the energy administration.
A very cold winter would cause a price spike, as it did two years ago when demand for natural gas soared, Flynn said.
"This market is really going to be determined by the weather and how cold it gets," he said.
For consumers, the drop in propane and natural gas prices brings "as much positive impact as what's happening at the pump," Lutts said.
"For consumers, it means less surprises and more potential benefits," he said.
A Section on 09/16/2015