Cheaper Oil: Benefits And Drawbacks

Consumers have certainly noticed the lower gasoline prices as of late, which can be a good sign for the economy. The lower gas prices are at the pump, the more consumers tend to spend on other items such as food, entertainment, and clothing. While the price of oil from oil and gas engineering companies has been much lower per barrel in recent months, these lower prices have their fair share of pros and cons. Let's examine the good and bad aspects of falling oil prices.

The Benefits

Since the price of gasoline largely depends on the price of oil per barrel, as those prices decrease, so does the cost of gasoline per gallon. Here are the pros for lower oil prices:

• More people are able to travel further, therefore increasing the need for hotels, cars, and restaurants.
• As people notice their monthly gas expenses decrease, they tend to spend more in retail stores, stimulating the economy.
• Lower gas prices can entice people to find employment further from home, encouraging economic growth and lower unemployment.
• When energy prices decrease, the rate of inflation tends to follow. This means the price of goods like fresh produce, dairy products, and meat will be lowered in sync with gas prices.
• Automobile companies and dealers typically see an increase in sales as gas prices dip lower.
• Oil production in the US has been steadily increasing, which has contributed to the lower price of gasoline.

The Cons

Of course, with every good sign that an economy sees, there are often a few pitfalls. Even though lower gas prices seem to be good for all, here are some of the downsides:

• Lower gas prices also indicate weaker global demand. This means countries like Japan, China, and Russia may be suffering economically because their demand for gasoline is less.
• When the cost of oil per barrel is lower, it can hurt competitors in Saudi Arabian nations. This can mean possible tensions will rise at some point between the US and Middle Eastern nations.
• Many US investors may suffer as the price of oil decreases. They rely on the price to increase in order to make a profit, so lower prices are not always ideal for those who back oil as an investment.
• For those in favor of the Keystone Pipeline, the lower oil prices may keep the pipeline's development at bay. This could mean thousands less jobs will be created as a result of the pipeline being put on hold due to lower gasoline and energy costs.