Cheaper gas "should help on the margin in terms of holiday sales, but I think holiday sales are still going to be weak," Jason Henderson, a vice president at the Omaha, Nebraska, branch of the Federal Reserve Bank of Kansas City, told Reuters.
"The lower gasoline prices will have different impacts on different income levels. Lower income levels will be much more impacted than people with higher incomes," Henderson said.
On the optimistic side, consumer savings from cheaper energy costs could reach $30 billion, said Craig Johnson, president of retail consulting firm Customer Growth Partners, with up to half of that amount getting spent in stores in November and December.
"Adding $15 billion back into retail sales will take what is otherwise a dismal holiday season and turn it at least into a semi-decent season," said Johnson.
He forecasts holiday sales 3.2 percent ahead of last year's, up from a previous view of 1.2 percent growth.
"It's still going to be a very challenging Christmas for retailers, but not anywhere where it's been predicted to be," he said.
Leading U.S. retailers, including Wal-Mart ,CostcoWholesale and J.C. Penney release October results on Wednesday and Thursday and Thomson Reuters is forecasting a decline of 0.1 percent.
For the holiday period, many forecasters have forecast much weaker growth, with some expecting holiday sales to be their worst in two decades.
Hope at the Pump
Still, lower gas prices have stirred hope for some retailers including Wal-Mart Chief Executive Lee Scott.
"Quite honestly, I am very positive about a number of things. The thing I'm most positive about is driving from my office to here, I went by a service station where the price of regular was $2.099—in Bentonville, Arkansas, just 30 minutes ago," Scott told analysts last week.
"For our core customer, 20 percent of whom do not have a bank (account), that is an extraordinary change in out-of-pocket expense," Scott said.
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For months, U.S. consumers have trimmed spending due to a housing slump, credit crunch and rising food and fuel prices.
Confidence has dwindled further since September as a financial markets crisis pointed to a severe global recession.
But as markets fell, so did gas prices.
The national average price for a gallon of self-serve, regular unleaded gas was $2.391 on Tuesday, about $1.72 less than it was at a record peak in July and more than 61 cents cheaper than it was last year, according to the American Automobile Association.
Too Good to be True?
Many consumers are still focused on paying for essentials, not gifts.
Around six in 10 U.S. shoppers are expected to cut holiday spending this season, and nearly seven in 10 consumers said they would wait for store sales, cut back on shopping trips to save gas and use more store coupons, according to a late October survey from Deloitte.
That has analysts skeptical over a boost from easing gas prices.
"Consumers are just going to be hoarding and not spending," said Mark Williams, a risk management expert and finance professor at Boston University.
"You could ask, what benefit is it to have $1 gas when I have 50 cents in my pocket?" Many families are still digging their way out of credit card debt piled on during the summer, when gas prices were high, said Britt Beemer, chairman of consumer behavior tracking firm America's Research Group.
It could take up to six months of lower fuel costs to revive consumer confidence, he said.
"A lot of consumers are afraid that gas prices are going to go right back up," Beemer said. "Falling gas prices could help, but it's going to take a while for consumers to get away from the previous shock."