Americans spent gas savings on dining, shopping ... and more gas

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Falling oil prices saved Americans hundreds of dollars at the gas pump in 2015, and a lot of them spent those savings … at the gas station.

Middle-income households saved an average of $477 through the year, thanks to gas prices that fell 28 percent from 2014. The biggest business winners of the gas-price windfall were restaurants and retailers, both of which saw their share of consumers' budgets increase. The data come from a report by the JPMorgan Chase Institute published Thursday.

A big chunk of the gasoline savings — a full $155 — was spent right back at the gas station. Consumers bought more gas, higher-quality gas and snacks.

Researchers at the Chase Institute looked at the spending habits of 1 million Chase credit and debit card holders to assess the effects of falling gas prices on household budgets.

Thanks to dropping oil prices, a gallon of gas cost an average of $2.43 last year, compared with $3.36 in 2014, according to data from the U.S. Energy Information Administration. That decline in prices was the equivalent of a 1 percent increase in household income for a middle-income family (defined as those with incomes between $43,100 and $56,500).

Saving on gas means buying more gas

Middle-income Americans spent 58 percent of what they would have otherwise saved thanks to cheaper gas. Chase said middle-income households had the potential to save an average of $632, but the lower gas prices encouraged drivers to drive more. Vehicle miles driven increased by 3 percent in 2015, according to the U.S. Bureau of Transportation Statistics.

"People are driving more" thanks to lower gas prices, said Fiona Greig, director of consumer research at the JPMorgan Chase Institute and a co-author of the report. "If you look at the aggregate statistics, this has contributed to a reversal of a trend."

Lower-income households saw even greater savings as a percentage of the family budget. Those in the lowest 20 percent (earning below $30,000) spent an average of $332 less on gas in 2015 than in 2014. That's a full 1.4 percent of their yearly budget.

"This is a material gain for people, especially for people at the lower-income level," Greig said. "It's more than a half month's rent or a half month's mortgage payment."

The report said 72 percent of households spent less in 2015 than in 2014, though those savings were felt differently in different parts of the country. States in the Northeast and West saw the smallest drop in gas spending. California saw just a 15 percent fall in average gas prices compared with the 28 percent decline in the country at large, according to the EIA.

Less money spent on city transit

It's bad news for public transit authorities around the country. Cheaper gasoline meant more people skipped the crowded buses or trains.

One limitation to the data is that not all purchases are made with credit cards. When people go to buy a new car, for example, they don't just swipe plastic and drive off the lot. The report's data are limited to purchases made with credit and debit cards.

Previous studies have shown that low gas prices can lead consumers to buy more automobiles, which are generally not bought with credit cards. The authors of the Chase report acknowledged that vehicle sales reached a 15-year high in 2015, 6 percent higher than 2014.

The national personal savings rate also increased in 2015, from 4.8 percent to 5.1 percent.

Irrational Americans

Consumers may use their gas savings for a little extra shopping or to take themselves out, but they also act irrationally, as a previous study found.

One limitation in the Chase information is that it reveals only where people spent their money, not what they bought exactly. It's possible that consumers just started buying a lot more snacks at their local gas station/convenience store, but that's unlikely. We know Americans drove more miles last year than the year before, but it's also possible they bought higher-octane gasoline than before.

If a person spends $40 a month on regular gasoline and the price of gas drops in half (as it did in 2008), a rational decision would be to take more road trips. Or rational people may add the savings to a different part of their household budget.

But that's not what happens. In his recent book "Misbehaving," behavioral economist Richard Thaler cites a paper describing how Americans react when gas prices fall.

The researchers found that consumers were likely to upgrade the quality of gas they purchased to high-octane varieties. That's despite that most of them wouldn't buy it normally. "The shift toward higher grades of gasoline was fourteen times greater than would be expected in a world in which money is treated as fungible," Thaler wrote.

More than 10 percent of the gas purchased in the U.S. in 2015 was premium grade, according to the EIA, up a full percentage point from 2014.