This article was written by Daisy Luther and originally published at The Organic Prepper
If you’ve been to the gas station lately, you probably just about turned cartwheels. I know that my last fill-up was almost $15 less than it was a few months ago, which goes along with a recent report that prices are the lowest they’ve been all year.
While this seems like a great thing, I have some unfortunate news for you. Cheap gas prices can actually be a BAD economic sign.
It boils down to a few things:
How this affects the oil industry How great a part of the GDP that the oil industry is How this affects the market
While these plummeting prices are awesome today, they could be the precursor to an oil industry crash. In turn, this could lead to an economic collapse like the one in Venezuela.
Here’s what the economic experts say about cheap gas
Vipin Arora, an economist with the U.S. Energy Information Administration, did some research that says plummeting gas prices aren’t good for everyone.
The story is essentially about consumption, which accounts for around 70% of inflation-adjusted U.S. GDP. Consumers have greater disposable income and increase expenditures on non-fuel goods and services. These rises filter through to investment and employment, and are counterbalanced somewhat by higher imports. The reemergence of the U.S. as a major oil producer has complicated this narrative: lower prices have a negative effect on production, investment, and employment in oil and gas extraction and related sectors. The question is about the balance between these forces—holding everything else constant, do the falls in production/investment dent or even reverse gains in consumption?
I will argue in this paper that it is possible. The reasons are unsurprising: (i) oil production is a much larger part
The remainder of this article is available in its entirety at Alt-Market