Friday, November 21, 2014



Yes, crude oil is now under $75 a barrel, thanks to the huge increase in domestic production and Saudi Arabia’s unwillingness to decrease production. Local gasoline prices are well under $3 in the Northern Shenandoah Valley, and some economists are predicting that prices should stay low for at least the next year because it would take about two years for increased demand to move prices back up to more than $90 a barrel.

This is good news for the U.S. economy, and in particular for consumers. A 15-20% drop in gas prices means money is freed up for consumption or investment. Plus, as the decrease in transportation costs (should) lead to lower prices of shipped commodities, we’ll be saving even more.

Americans were spending about $1 billion a day on gasoline, so a 15% price decrease means that just in November and December, about $8.4 billion is being re-injected into the economy. By comparison, the economic stimulus package passed in 2009 amounted to some $840 billion over ten years, most of which ($816 billion) was already spent by the beginning of 2014. Of the remaining funds to be re-injected into the economy from the stimulus package, there would be an average of $0.4 billion added to the economy per month, and these funds do not reach Americans equally. By contrast, the $4 billion per month being re-injected naturally by the petroleum boom are directly helping every American who uses petroleum products.

Hopefully, this natural stimulus will have long-lasting effects for our economy and coupled with the recent Republican tide in Congress, will place our country on a path to true prosperity.

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