Oil is hovering around $29 per barrel, gas is cheaper than it has been in years. I would have expected this to stimulate the economy and lead to increasing wages. But, so far this hasn't happened. The stock market has lost a lot of ground since the beginning of the year, and in spite of the fact that the American economy is slowly improving, the world economy, especially China's economy, is still sluggish. Why? Why hasn't the low price of a barrel of oil and a gallon of gas led to good times?

http://www.nytimes.com/2016/01/22/bu...T.nav=top-news

 

I'm not an economist, but companies and people are psychologically driven. And right now everyone is very nervous. They aren't spending those gas savings elsewhere to stimulate the economy. That's why the market has been on such a rollercoaster lately (largely due to the Chinese this time). Basically, when China (or another large economic power) coughs, the U.S. catches a cold. Right now, I'd say we have bronchitis headed for pneumonia!

 

That and everyone knows the low gas prices are just temporary, so I don't think anyone really expects it to raise wages in any way.

 

these things take time. In all honesty I'd actually be concerned about the economy overheating now.
the fed has been loosening monetary policy for the last 8 years with QE and now with cheap gas, it'll be like supercharging with nitrous.
there will be a period of monetary realignment.
if you heavily invested in oil or oil exploration or coal sands or the support infrastructure, yeah you're not going to be real happy.
If you an airline or long haul trucker, you're doing the happy dance.
Myself, I'm delighted that heating oil is almost a third of what it was a few years ago.

 

This is a funny thread. We have cheap gas and can't figure out why everything isn't great. Ask yourselves "who gets hurt by lower gas prices" and you will have your answer. It is Because the big oil companies are not making as much money and consolidating operations and the small ones are closing down operations all together. The entire energy sector which drove much of the economy over the past five years is in the tank. That is what started our bear market. Period, end of story. $5 to 10 less at the gas pump every week isn't going to change that much. Maybe if the cost savings start trickling through the rest of the economy in the form of lower production and transpiration costs we will see an uptick. Give that a year or so.

 

About the wages.... no correlation between the two.

 

For me my health insurance rate just went up $30/month. My gas savings is going towards that.
Levi

 

Good analogy Bill. But I do think the prices at the pump are too high given the dramatic drop in oil prices. They go up fast and come down very slow.

 

The patch has given up about 100K jobs, and has affected energy profits. These will be compounded by the glut of crude coming out of Iran. That said, every other industry that relies on petroleum is benefiting. Airlines have record profits, transportation costs are down and the companies that provide those services like FedEx and UPS and Laser etc. are doing fine. The chemical and pharma industries are benefiting as well.

The retailers benefit, the consumer benefits, the travel industry benefits, but Big Oil and Gas and their suppliers and investors do not, therefore it's Oil-mageddon (Sorry it's the snow threats of the end of the world bleeding through). If you are invested in oil and gas exploration, times are bad, but for the rest of the economy, it makes no sense to me.

 

Ken, You are right about Iran and they will only make the glut work now that the embargo is off.

People don't realize how many non-oil companies service and profit from the oil companies. If you count all the related industries that have cut back or shut down it makes a big impact.

Unfortunately, there is no real quid pro quo on the other side with respect to jobs. Airlines, other transportation businesses and those that use oil as a raw material for production, like plastics, are enjoying the immediate gains, but only because the cost side is down, not because they are experiencing a boom in business. So there really isn't any trickle down of business to the companies that support those different industries, just higher profits. Airlines seem reluctant to pass the savings on, so the consumers aren't really seeing the benefit other than the cost of their personal consumption. I don't know if other transportation companies are cutting prices, but I bet they are either holding the line on pricing, or making only very modest adjustments. If these companies start using the profits to upgrade fleets or the methods of production, then we will see some impact. But again, my guess is that those things will take a year or more to trickle down. And let's hope the products that they buy are made in the US. There is certainly no guarantee of that.