Washington Restaurant Market Watch: Gas prices go down, restaurants benefit

Washington Restaurant Market Watch: Gas prices go down, restaurants benefit https://wahospitality.org/wp-content/uploads/2015/12/petrol-996617_1920.jpg

By Paul Schlienz

You see it every time you go to the pump to fill ‘er up.

Gas prices are going down, down and down. And no one when it’s going to stop.

While there is a sackcloth and ashes mood of mourning in oil patches like Texas, Louisiana, North Dakota, Alberta or Saudi Arabia, and those who trade in petroleum futures are none too happy either, motorists and many business owners have good reason to be very pleased.

Among those businesses affected positively by lower gasoline prices are restaurants.

With lower gasoline prices, consumers who drive have more money to spend that’s not going in their car’s gas tank, according to an analysis of customer credit and debit card data by the JPMorgan Chase Institute, a global economics think tank tied to the bank with the same name.

Eighty percent of the money saved due to cheaper gas prices goes to other purchases. People spent approximately 33 percent of their income on non-durable goods, and around 32 percent on services. In the meantime, a whopping 18 percent of Chase customers’ gas savings went to restaurants.

No wonder restaurant operators love low gas prices, and are feeling positive about their prospects for 2016.

“For their part, restaurant operators are increasingly optimistic that business conditions will continue to improve in the coming months,” wrote Bruce Grinnell, the National Restaurant Association’s chief economist. “In the association’s November 2014 Restaurant Industry Tracking Survey, 52 percent of operators said they expect to see higher sales in six months, compared to previous-year levels. Only 6 percent think their sales will dip in six months. This represented the most optimistic operator outlook in nearly three years.”

How long will this good thing last?

No one really knows for sure – not even the experts.

Former Louisiana State University professor Loren Scott, a leading economist with ties to the oil industry, predicted as recently as October that oil would rise up to the $55-a-barrel range in 2016, but hedged his bets by also saying that oil prices could range anywhere from $30 to $90 a barrel.

“I did not expect [prices] to get this low,” Scott told the Shreveport Times. “As you can tell by the range, it was not totally unexpected. I had hoped prices would not do this but would turn north. I had hoped OPEC would come out of that meeting and say ‘Turn the faucet off some.’ It’s something they can do in a heartbeat.”

Restaurant operators, for their part, remain more optimistic about the economy, in general, than they have been in recent memory. Thirty-five percent of restaurateurs expect the economy to improve over the course of the next six months. This is the strongest reading of the economy since June 2012.  Only a mere 8 percent of restaurateurs think economic conditions will go downhill in the next six months – the lowest negative economic sentiment in almost four years.

“The road forward won’t be without speed bumps, as consumers are still relatively cautious in their spending habits,” Grinell wrote.  “However, the underlying fundamentals of steady job growth, lower gas prices and rising consumer confidence point toward an improving business environment for restaurants in the year ahead.”