http://money.cnn.com/2014/12/10/investing/oil-prices-akin-to-tax-cut/index.html?iid=SF_E_River
Gas prices have gone down dramatically in recent months, on average a gallon of regular gas costs $2.64 according to AAA. In extreme cases, in some places, prices has fallen to below $2 a gallon. This price drop has given a large boost to the U.S. economy. As gas prices get lower, that is saving households a lot of money. All this money that households are saving becomes disposable income, money that people can use to but other things or save. This helps the economy by increasing spending and saving, retailers dream. It is estimated that the lowering gas prices will increase around 1/2 of a percent to the annual GDP. Can gas prices go too low? Will they go too low? Are there negative effects to the lowering of gas prices so lower other than hurting the energy industry itself?
You ask a really interesting question at the end of your blog post: is there a point when low gas prices actually hurt the economy? As a consumer, I would think the answer is no, but I'm not so sure that is the case for those somehow involved in the oil industry. I also wonder how long these low gas prices will persist? Is this just a bubble or is this the new normal?
ReplyDeleteLow gas prices are helping the consumer spend more money especially during this Holiday Season. With that said the DOW is down 200 points today and the entire market seems to be plateauing after some thought we would see a continued growth in the markets. I think this is related to gas prices falling.
ReplyDeleteIf gas prices get too low they can effect the economy somewhat. As Nathan stated, Dow is down 200 points today; 200 points is not what it once was but it's still something. However, when dealing with economics, it's give and take. Low gas prices has led to more disposable income and consumption. So we have to decide which one is more important and critical to the economy.
ReplyDeleteAs you stated, the decrease in gas prices generates more disposable income therefore people can save and consumer more. Not only is a retailers dream, but its boosting our economy. This is true because our GDP will increase by half a percent as a result of the lowered gas prices. As Caroline stated, I think time will tell in terms of predicting if this is a new norm or is this just a bubble?
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