Consumers may think cheaper gas means cheaper groceries. But, that's not the case because transportation is only a small percentage of the total production cost of food.
UC Davis economist Daniel Sumner says that even when fuel costs drop by half that results in less than a one percent drop in supermarket prices. The bulk of costs for retailers and restaurants are processing, labor, and packaging.
Plus, it may be too early to tell if the cost of food will drop due to falling oil prices. Historically, it takes up to a year for fuel costs to be reflected at the supermarket.
However, Sacramento State University economist Kristen Kiesel speculates shoppers might see lower prices at farmers' markets. Sumner says, "Oil prices might affect prices at farmers' market more than at the supermarket and restaurants, as processing, packaging, etc. play less of a role. In the same logic, I would speculate that the most noticeable decrease would be on fresh vegetables."
The USDA forecast that overall food prices will likely increase by two to three percent this year.