The Positive And Negative Effects Of Falling Oil Prices
The Positive and Negative Effects of Falling Oil Prices
Over the last few months, oil and gas prices have dropped a significant amount, to much relief of American consumers. But is the falling cost of oil necessarily a good thing? For some the answer is no, but to others, yes. Here is a compiled list of some of the benefits and some of the disadvantages caused by the drop in price. The cost of filling up a tank of gas is the lowest it has been in 11 years. Consumers will spend an average of $750 less per household this year than they did in 2014, leaving everyone with more money to spend, which will then lift the whole economy. Many businesses are also benefitting from the drop in prices of oil. Airlines, package-delivery firms, and trucking companies are saving plethora amounts of money, given that fuel accounts for as much as 40% their costs. Retailers, restaurants, and hotels benefit directly from consumer spending. Lower oil prices also hurt the economies of U.S. adversaries, particularly Iran, Russia, and Venezuela. That could, in turn, make the world a little bit safer. Although there are many winners such as American consumers and oil-sensitive industries, the dramatic price decrease is bad news for oil producers and oil-exporting countries. The shale oil industry is one of the industries impacted negatively. With prices as low as $47 a barrel, and the considered break- even price being $60, the industry is hardly making a profit, causing shale oil companies to downsize or discontinue operations. It could end the fracking boom and harm conventional drilling as well. Massive job losses would then ensue. Declining oil prices has an impact on the auto manufacturers as well. Overall demand increases, but buyers will switch back to larger vehicles with lower gas mileage. When gas prices fall, concern for fuel efficiency loses its momentum, increasing flexibility on the administration’s energy policy. While many people are happy about oil
Over the last few months, oil and gas prices have dropped a significant amount, to much relief of American consumers. But is the falling cost of oil necessarily a good thing? For some the answer is no, but to others, yes. Here is a compiled list of some of the benefits and some of the disadvantages caused by the drop in price. The cost of filling up a tank of gas is the lowest it has been in 11 years. Consumers will spend an average of $750 less per household this year than they did in 2014, leaving everyone with more money to spend, which will then lift the whole economy. Many businesses are also benefitting from the drop in prices of oil. Airlines, package-delivery firms, and trucking companies are saving plethora amounts of money, given that fuel accounts for as much as 40% their costs. Retailers, restaurants, and hotels benefit directly from consumer spending. Lower oil prices also hurt the economies of U.S. adversaries, particularly Iran, Russia, and Venezuela. That could, in turn, make the world a little bit safer. Although there are many winners such as American consumers and oil-sensitive industries, the dramatic price decrease is bad news for oil producers and oil-exporting countries. The shale oil industry is one of the industries impacted negatively. With prices as low as $47 a barrel, and the considered break- even price being $60, the industry is hardly making a profit, causing shale oil companies to downsize or discontinue operations. It could end the fracking boom and harm conventional drilling as well. Massive job losses would then ensue. Declining oil prices has an impact on the auto manufacturers as well. Overall demand increases, but buyers will switch back to larger vehicles with lower gas mileage. When gas prices fall, concern for fuel efficiency loses its momentum, increasing flexibility on the administration’s energy policy. While many people are happy about oil