Low gas prices...bad?

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    BigVMan23's Avatar
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    Low gas prices...bad?

    Ok, we are all LOVING, as consumers, the low gas prices...it's great on our wallets. But, on almost every news report on the radio (I listen to a lot of news/talk, watch very little news on tv), one of the first things being reported on the past few days is how "bad" the low gas/oil prices are...people are going to lose their jobs, facilities are going to shut down, oil is too cheap, etc. So, which is it...low gas/oil prices are good or bad for the economy? And what's the cut off point if prices are actually too low right now? $50 a barrel for crude, $1.99 a gallon for regular? Excuse me if I'm just confused.
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    Getslow's Avatar
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    Of course low gas prices are bad for some industries. It's bad for anyone for whom high gas prices are good: oil drillers, refiners, sellers, makers of alternative fuel cars, etc. But it can also drive down costs on other things.

    When the price of cotton his high, it's good for some folks and not for others. Whe the price of lithium is high, it's good for some folks and not for others.

    That said, if OPEC is refusing to cut production and drive the gas price back up because they're trying to kill off domestic production in North America, that's a different problem.

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    Iran now being able to sell on the global market will probably at least in the short term keep prices low.

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    Good for our wallets?
    I'm assuming you have not been following the DOW lately.

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    A side note is that this is weakening China and Russia somewhat financially.

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    Jumper_Dad's Avatar
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    Quote Originally Posted by TAC View Post
    Good for our wallets?
    I'm assuming you have not been following the DOW lately.
    Depends on what you are in.

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    Im as Confused as BigVMan. To me it seem like a great thing to have gas prices lower. It helps the shipping/trucking industry with their cost, as well as get people on the road taking little weekend holidays here and there. Frees up money where its not as much to drive. A weekend to Tennennesse doesnt seem as challenging as it did when gas was $3 a gallon. I cant see the reason in any situation that it would be detramental. Who is at risk in loseing their job when lower gas prices could potentially help bolster the economy as a whole? I know in my home we have a weekly gas budget we try to adhere to. The lower prices have really helped make those monies more flexabile in my home.

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    I don't think you can make a direct link between price of oil being good or bad for the overall economy. It MAY be a sign of the economy vs it influencing the economy.

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    BigVMan23's Avatar
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    Quote Originally Posted by Getslow View Post
    Of course low gas prices are bad for some industries. It's bad for anyone for whom high gas prices are good: oil drillers, refiners, sellers, makers of alternative fuel cars, etc. But it can also drive down costs on other things.

    When the price of cotton his high, it's good for some folks and not for others. Whe the price of lithium is high, it's good for some folks and not for others.

    That said, if OPEC is refusing to cut production and drive the gas price back up because they're trying to kill off domestic production in North America, that's a different problem.
    I get all that...but my question is, when the rubber meets the road...in totality are low prices good or bad? When the total sum is figured, which leaves us better off?

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    Quote Originally Posted by Clyde View Post
    I don't think you can make a direct link between price of oil being good or bad for the overall economy. It MAY be a sign of the economy vs it influencing the economy.
    But that sure seems to be the talk and there seem to be several "experts" that are saying it's a bad thing.

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    Getslow's Avatar
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    Quote Originally Posted by BigVMan23 View Post
    I get all that...but my question is, when the rubber meets the road...in totality are low prices good or bad? When the total sum is figured, which leaves us better off?
    That's a doozy. Somebody smarter than me is going to have to figure that out.

    Personally, sustained low gas prices make every good cheaper to ship, and therefore to sell. Especially given the insane weather we've been having, it may actually be helping normalize some things on food prices to compensate for low crop yields.

    As long as it doesn't stay low enough to kill off domestic production, I think a correction from the $100/barrel price which it had been in and out of over the four years previous is a good thing.

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    Quote Originally Posted by BigVMan23 View Post
    But that sure seems to be the talk and there seem to be several "experts" that are saying it's a bad thing.
    The downside is less investment by companies which means less financing for financial institutions. It also means layoffs in the oil/shale industry which means anyone that counts on those employees for their small businesses also suffer.

    In order for it to outweigh the negatives you need everyone spending their gas bill savings elsewhere. There's no guarantee that happens.

    You then get the stock market going down which scares people which means less spending due to fear.

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    With transportation prices down, one of my customers still wants to raise their direct import freight rate and wants us to hold the ELC!! We have held the FOB but they cannot justify the higher rate other than it being a profit center for them.

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    Quote Originally Posted by Clyde View Post
    I don't think you can make a direct link between price of oil being good or bad for the overall economy. It MAY be a sign of the economy vs it influencing the economy.
    Psychologically investors are still 100% attributing it to lower demand, when in reality it's abundance of supply. I mean hello investors, how long have we been fracking now and Iran oil is about to hit the market.

    Investors are over playing their cards and being dramatic. Simple supply and demand has corrected the 15 year old problem.

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    By the way, I read yesterday that if the cost of crude was $0/barrel the price of gas would still be over $1.00/gallon.

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