Oil Price Plunge Isn’t All Good News for the Economy

The recent plunge in oil prices should be — mostly — good for the U.S. economy.

Cheaper fuel brings big savings for consumers and businesses — several hundred billion dollars since prices crashed from more than $100 a barrel to less than $30. Gasoline, diesel and heating oil make up about two-thirds of the roughly 20 million barrels of oil consumed in the U.S. every day.

Lower oil prices are also helping cut the U.S. trade deficit by slashing the cost of imported oil. And they’ve brought lower operating costs for shippers and other transportation companies, which helps boost profits and hold the line on the cost of travel and moving goods.

All in, the sustained drop in crude prices should add roughly half a percent to U.S. GDP, according to the Dallas Fed.

And the overall role of the energy sector on U.S. employment is relatively small, according to Dallas Fed economists. Oil and gas industry jobs as a share of total employment peaked in the early 1980s at less than 0.8 percent, and currently stand at about 0.5 percent.

Lower prices are expected to boost job growth in states outside the oil patch, according to analysts at the Council on Foreign Relations.

CNBC

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.