Oil prices tanking, why isn't the economy soaring?

At this rate gas stations will be paying us to take away the gas. The reduced energy costs should have a great impact, people should have more money in their pockets, business costs for manufacturing and shipping should be much lower now. It’s not just oil, it’s natural gas also. Where’s the boom?

The oil business itself is a significant portion of the American economy and for obvious reasons it’s not doing well in a period of falling oil prices.

We know the oil guys are already rich. What about everyone else?

This is what I feared. That we’re overly invested in energy and losing on the supply side.

The oil guys employ a lot of everyone else. When they are laid off, they spend less. That depresses retail goods and services, who cut back on production and hiring. And so on.

Come on. By this logic, high gasoline prices should be a boon to the economy. They’re not. :wink:

Yeah, but why is that net drag on the economy? Low oil prices should be a boon to the world economy, and that should help out lost of sectors in the American economy. I’m not a financial analyst, but I’m not buying the simple explanations offered so far.

The IMF seems to think it’s going to spur global economic growth.

These things don’t happen overnight. Businesses - large ones, at least - plan strategy well in advance to take advantage of low oil prices or mitigate the effects of high ones. It will be a while before they change their operations around to take advantage of lower transportation costs.

Yeah, but oil prices have been low for quite some time now.

True. But I doubt the smart money is on them staying low.

I think the argument mixes up cause and effect. Oil prices are low because the economy is not stellar (more in other countries than the US) and the same inelasticity of demand that makes even a slight shortage turn into a huge price increase, makes even a slight glut force prices low.

I may be isolated in a pocket of upper middle class prosperity, but isn’t the economy doing pretty good right now?

It actually is. I can look for an online cite later but here the Houston newspaper reports Moody’s Investors Service forecasts below $50 until 2018 - though that’s one of the “gloomier” predictions. My understanding is that a real bounce back in price will require cutting production AND a resurgence in the Chinese economy.

In stock price terms, yes. In terms of personal income and wealth growth, not so much, at least at some income levels.

Huh. Thanks for the correction.

Oil prices are low because OPEC is attempting to bankrupt or reduce investment in the oil extraction in the non-OPEC oil producers. They are intentionally keeping production high to destroy high cost extraction like in the arctic.

I feel like low used in this way is being misused.
You mean after a 2 year high? Prices have not fallen even close to what they were 3 years ago. I imagine if I was watching the falling price of gas (at the pump) to make financial decisions I’d end up in ruin.
I think when the shale drillers were the reason for falling gas prices , OUR economy certainly seemed to be doing better.

Re: why prices are low, does not address why we are not having a boom.



No kidding. It drove me crazy when oil/gasoline shot up everyone I talked to said “well that’s it forever.” but now that they’ve plummeted it’s “well it’s got to go back up”.

I may be mistaken but current prices seem like a 10 year low. That doesn’t account for inflation, and it varies around the country. Natural gas prices are definitely much lower than they were 2 years ago.