Cheap Oil Will Not Boost the US Economy
The stark reduction of oil prices in the world is not news to anybody and people are really excited about it in general. The consumers of US though, are thinking twice before deciding to spend their windfall earned from meagerly priced gasoline and are trying to save even more money. This has been indicated by quite some polls done by companies and this all indicates that low oil prices aren’t going to boost the economy much- this time.
Cheap oil won’t be a boom for the US economy:
Cheap oil isn’t a phrase that we use very often but in the recent past whenever we have used it, it has brought about many positive signs for the country. The data from the Commerce Department indicates that when crude oil dropped 70 percent in price last year, the reduction in day to day spending of gasoline and other related products was as much as 115 billion (annually). This is roughly equal to around 0.5 percent of the GDP. During the same time though, the savings also piled up a lot and reached to around 121 billion dollars. Out of this amount, the windfall did account for a significant percentage.
While the numbers and figures from the past are indicative of delightful results, this year the economists doubt that we are going to have the same luck. Experts believe that the scars from the recession (2007-09) are still very fresh and this could cause the effect on consumption to not amount to anything significant. To put things into perspective consider this: In mid 2014, the economy recovered around 7 million jobs that were lost as a result of the downturn.
These notions however pragmatic are only opinions and the real repercussions will only be apparent once we analyse the results of the whole cheap oil situation. Let’s hope for the best.
