Posted on 05/22/2015 10:10:17 AM PDT by thackney
Full Title: Cheaper oil isn't such a benefit for US economy anymore as pullbacks in drilling cause damage
If there was one thing most economists agreed on at the start of the year, it was this: Plunging oil prices would boost the U.S. economy.
It hasn't worked out that way.
The economy is thought to have shrunk in the January-March quarter and may barely grow for the first half of 2015 — thanks in part to sharp cuts in energy drilling. And despite their savings at the gas pump, consumers have slowed rather than increased their spending....
So what did they get wrong?
It turns out that the economic effects of lower energy prices have evolved since the Great Recession. Corporate spending on drill rigs, steel piping for wells and railcars to transport oil has become an increasingly vital driver of economic growth. So when oil prices fall and energy companies retrench, the economy suffers....
(Excerpt) Read more at calgaryherald.com ...
The reason is because any savings at the pump is going to higher medical insurance costs caused by Obamacare.
It is truly the nuttiest of the 50 states.
Gas drops by a dollar when you cross the California state line.
Taxes in part. Special refining formulations in part.
Do Californians think the air is dirtier in Oregon?
In a lot of places gas is about $2.60. California is a train wreck.
‘zactly.
While the taxation is something to be addressed, I’m comparing today’s price in California to the highest price I paid in California. I’m not comparing it to Kansas or Tennessee.
You’re changing the subject to reduce the impact of my emphasis.
Why am I paying so close to the highest prices I’ve every paid for gas in California, if the price of oil is so low?
The carbon tax just added is $0.10 cents a gallon. It’s not $1.50 a gallon.
It it was $0.000001 cent a gallon, it would still be idiotic by the way.
Cheaper gas is adding disposable income into the hands of every American who own a car. I live in a very low cost of living area and lower gas is adding $50/month for me. I imagine the national average would be higher and multiplying that by all Americans annually would equal some billions back into the economy.
The cost of gas obviously affects the price of everything else.
Its also an indicator. Lower gas prices mean more income for the average consumer, and it reduces the cost of shipping for everything.
Its also an indicator that the economy is slowing down. So while I love cheap gas, I also recognize that its telling me something. If you sell cars, or blue jeans at the mall, or your factory sells transformers, your business is probably also falling off. Less stuff being shipped means less pressure on the price of fuel.
The problem for California isn’t entirely related to it being a train wreck, although there’s a good case to be made that California is a train wreck.
California formulates it’s gas differently. It does so because it had a serious problem with smog. The air is a lot cleaner today due to the formulation. The formulation changes during the winter and summer months also.
I can remember many days in the 70s where I could see a thick haze in the air even looking at objects half a block away. I don’t see days anywhere near that bad even one day of the year any longer.
I think California's unique formulation is overkill. Note that other states are more densely populated, don't have smog problems and use standard gasoline formulations.
AP crapola in defense of a sh*tty economy.
More Obamanomics.
Congratulations, America.
OPEC did not cut production to cause fracking operations to stop.
Next question?
I agree that there's a negative impact of lower oilfield spending. I've argued that increased consumer spending would more than offset that. I could be wrong, but I don't think so in this case.
You've no doubt heard the saying that if you took every economist in the world and laid them end to end, they still wouldn't even reach a conclusion. I've read stunning statements by economists and this one qualifies. Oilfield spending is down, GPD numbers trend down, therefore one caused the other. No.
Second, there's a bias among economists in favor of that which can be measured...if it can't be measured, it doesn't exist. Cutbacks in oilfield and upline spending are relatively easy to measure. The impact of lower prices on the general economy is so diffused as to be impossible to measure. Therefore...
There are so many factors involved in the economy, yet this analysis takes none of them into account. I've viewed the recent dip and bounce as 'dead cat' in nature. I'm amazed that we've seen the economy we have because there are serious, strong, headwinds.
Mature companies and industries are cost cutting at a furious rate. Locally, that includes Boeing and Microsoft. Lots of local hiring and activity by the Amazons, Googles, etc.
Energy factors into too much of the economy but unfortunately there's no direct measure.
$2.59 a gallon in Phoenix.
If the oil companies were allowed to build more refineries, the price of gasoline would drop.
I’ll go one better, if we had just ONE National standard for fuel, the price of gasoline would drop.
Wells are hydraulic fractured, rigs are used to drill the wells before hydraulic fracturing or other completion techniques are done.
Your constant ringing of hands over the plight of the oil companies leads one to believe you are closer than you let on.
For as long as I have posted on Free Republic, I have always been clear I work in the oil/gas/petrochem industry. I have not worked for an oil company, but they are usually my clients.
I’m showing you it is not an oil/gasoline company issue, it is a California regulation issue.
CA new tax along with CA special recipe that prevents gasoline used in other states drives up the price. CA has a couple refinery problems and because of the special recipe they cannot easily get gasoline from other sources.
Cheaper trucking - not good for US economy.
Cheaper airline flights - not good for US economy.
Lower electricity rates - not good for US economy.
Cheaper fertilizers - not good for US economy.
C’mon $150 bbl oil!
So where is the economic boom so many claimed would happen with all these months of cheaper gasoline?
The savings is being offset by other economic problems.
Consumption of gasoline is up, not down.
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