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Oil & Gas Price: Are Lower Gas Prices Bad for the Economy?

Contributor: Jessica Livingston
Posted: 02/05/2013
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In the United States, gasoline prices have been going down.

That’s good, right? I know I didn’t like paying $30 every time I had to fill up my car a couple of years ago.

Apparently not. An article in The Washington Post claims that gas prices going down is bad for the economy. The reasoning is that gas prices are falling because people aren’t driving because of the bad economy, which means that the oil companies aren’t making money.

It’s a vicious cycle, I tell ya!

Well, in a weird way, I guess I understand the logic of the argument. In order to improve the economy, people need to start spending again. Because people aren’t spending, businesses are suffering. If businesses keep collapsing, especially in an industry as important as the oil and gas industry, then there’s no way the economy will improve.

However, people won’t spend if prices are too high, because they themselves were affected by the bad economy.

So, if gas prices are down, people will drive more. And spend more on gas. And then the oil companies will eventually start raising their prices.

Anyway, while the lower gas prices might not be good right now for the oil companies, I don’t think it’s detrimental to the economy. In fact, the lower gas prices might spur people to spend more on gas.

And the cycle will keep spinning.

What’s your take on this?

By Jessica Livingston

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Contributor: Jessica Livingston