Saturday, February 14, 2015

Effects of Oil Price Dropping.


At the beginning of 2010, the price of oil was around $70 per barrel. By December 2010, the price had risen to about $120 per barrel. For most of the following years, the price of oil ranged between $100 and $125 and only once dropped slightly below $100 per barrel. This resulted in extremely high gas prices. It was not uncommon to see gas prices in the three to four dollar per gallon range. Most Americans were frustrated with the high gas prices. In August of 2014, oil prices began to fall dramatically. Today oil is in the $60 per barrel range. The cost of gas at the pump has dropped to the low three dollars per gallon range. While drivers are very happy about this, is this a good thing for our economy?

Some of the positive consequences of lower gas prices include lower cost of transportation. This is good for travelers and for consumers as the cost to ship goods is reduced. Some of the problems include shifting away from fuel efficient vehicles. When gas prices are high, consumers look to buy smaller and more fuel efficient vehicles, but when gas prices fall, consumers quickly forget their previous pain and begin to buy larger cars and trucks that consume more fuel and result in more pollution. This means less investment in alternative energy vehicles. Lower oil prices are also hurting gas companies as there is less overall demand resulting in lower stock prices. Lower stock prices means less employment opportunities and fewer purchases of goods and services from suppliers. Lower oil prices while positive in some instances have an effect on the economy which might possibly outweigh the benefits.

Questions:

Do you think lower oil prices are good or bad for the economy?

Should the government create a program like putting a man on the moon but focused on developing alternative energy source so that U.S. could become independent of oil and the political problems associated with maintaining an oil supply?

If the U.S. is less dependent on Middle East oil, what will happen to those governments like Saudi Arabia that are dependent on oil as their only significant source of revenue?

2 comments:

Murray Sandmeyer said...

I think that the low price of oil is definitely connected to some harmful trends in energy. It makes sense that people buy more gas-guzzlers when oil is cheaper, but the reason behind the low prices in oil also reveals some problematic truths. The practice of fracking, which has undeniable environmental consequences, is largely the reason that the price has dropped so much. There are many environmentally destructive aspects connected to oil, so I think the only way to solve this is to begin to forego nonrenewable energy sources.

Jeremiah Rondeau said...

Gosh... the real takeaway is that some people will complain about anything. Middle class Americans have more money in their pockets ($750/family/year according to Obama at SOTU), and any product that utilizes transportation (literally everything) will be cheaper, or generate higher profits for shareholders (leading to higher overall stock prices).

A vast majority of the oil we use in the US comes from North America (with a plurality coming from the US itself, which has increased it's production on private land). Hooray. Frack baby frack.