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Low Oil Prices

 
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PostPosted: Mon Jan 25, 2016 2:45 pm    Post subject: Low Oil Prices Reply with quote

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ďIf thereís an increase in spending by consumers of $1 and a decrease in spending by producers of $1, itís not really a net wash for the economy. The reason is that the consumers are spending their money in different places and on different items than the producers are cutting.Ē

Americans donít have to work so hard for the same barrel of oil. We can import cheap oil and produce other goods & services that actually raise our living standards.

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Itís not a zero-sum game.

Thereís abundant unemployed and underemployed labor and capital for the non-oil economy to grow from stronger demand, because of cheaper oil, while oil production continues.

Both producers and consumers donít have to work so hard for the same barrel of oil. Cheaper oil can be imported and fewer resources can be employed in domestic oil production. Consumers gain more than producers lose.

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Professor Hamilton estimates U.S. consumers spend over $200 billion a year less for gasoline, because of lower prices.

So, consumers can purchase more other goods & services. Personally, since the price of gasoline is half as much, I spend more at Home Depot and Costco, upgraded my Apple iPhone, bought more clothes (e.g. at Sears), go to the theater more often, go to restaurants more often (e.g. Black Angus), etc.. More spending creates more employment.

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