Falling Gas Prices Bring Mixed Predictions

For the first time in years since 2009, gas prices have been nearing a substantial low, and many drivers are now paying less than $3 per gallon. Since late July 2014, Americans have eagerly been watching gas prices plummet steadily. Gas stations are the only prominent business that display the everyday fluctuation of the economy on their billboards— it’s only natural to associate the rise and fall of these prices with how the economy will perform. Many treat their gas stations as stock tickers, and assume that the falling gas prices translates into better economic conditions ahead. However, not everyone is jumping for joy at this price drop. Economists are divided on their beliefs as to what the recent drop in gas prices say about the upcoming economy; many believe a recession is to come, while others believe that lower gas prices will bring an economic boom.

Looking on the positive aspect first, lower gas prices mean a lot for consumers who have been paying sky high prices for gases these past years. Besides the fact that everyone will be able to keep more cash in their pockets, economists are eagerly expecting the consumers to spend and invest more in other aspects of the industry, like retail and groceries. Consumers will have more personal disposable income, and spending will increase. An increase in consumer spending will hold down inflation and greatly support the local economies and the stock market.

Economists also take the drop in gas prices as a sign of an upcoming recession. The drop in gas prices will negatively affect all of those working in the oil industry. All of the people who contribute in bringing the gas to the consumers’ cars will suffer— job wages may be cut and jobs may be potentially laid off in order to balance out with the lowered gas price. This may not seem like much, as it is only affecting one sector of the economy rather than the entire, but a fall in the oil industry will affect the nation’s GDP (Gross Domestic Product). This is because the energy sector is ascribed to be doing the “heavy lifting” of capital investment in a time where the other sectors are not contributing as much.

Looking in the long run, the drop in oil prices will make energy prices high once demand returns. People will begin to lose incentives to be innovative and to create new, alternative energy sources— this will affect everyone since energy sources by then will be less plentiful, bringing higher costs and demands. In the long run, it seems as if the money saved will be taken back again. Right now, there is no true and definitive meaning as to what the decreased gas prices will bring us in terms of the economy; we can only sit tight and cross our fingers in hopes for the best.

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