Low gas prices are not great

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  • #17471
    paulwalker
    Participant

    So I saw 1.99 in WA (Richland), and even lower in Cle Elum, surprising since it is just off I-90, and in OR I saw 1.89 in Pendleton last week. Is this great news?

    No, not really. The difference between 3.00 and 2.00 per gallon amounts to an average of $300 savings for most Americans a year. In the meantime the lower oil prices have been one of the primary factors in the stock market losing 15% in the past year. So an average portfolio of 100,000 has lost $15,000.

    Enjoy your low gas prices, and compare to your retirement.

    Also remember 2008, where gas prices plummeted to similar prices…and guess what, it was the beginning of a severe recession. This will not necessarily occur again, but this is ominous. EDIT: China is in trouble economically, and that is a huge part of the equation.

    #17475
    missing_kskd
    Participant

    Seems like a great reason to actually setup defined benefit plans, rather than risk for retirees.

    They could choose some risk, and many would.

    But the idea of taking the years worked and gambling with them as a primary vehicle for retirement isn’t all that wise for most Americans, particularly given how Wall Street has behaved.

    Be all that as it may, one could very easily improve on their contribution with the gas savings too.

    I think it’s awesome. If someone is on that point system, sub dollar gas has happened a few times already. I got a 90 cent fill up just a while back. That’s two free rides to the beach in my vehicle.

    I also think it’s a worry, but for a much different reason. (I don’t have a market position at present, instead holding private assets) That reason is what may happen with oil after this brutal long game price war the Saudis have playing out ends. Nobody, but the Saudis know how long they can play, if even they do.

    But there will be an end to the game, and when that end comes, it’s going to impact a lot of things. Right now, domestic production is increasingly a loser. People like to cap wells and wait when the barrel may cost more than the oil that goes in it does. Or, they may not continue to do exploratory work, or they may need to recover losses and debt from playing that game too.

    It may not be a gentle rise up. And the overall economic impact will be significant.

    One thing low gas prices does do is directly stimulate other parts of the economy.

    Those portfolio losses could be offset and even gains, if we would get sane and recognize the need for demand and it’s overall role in growth. Corporations hold a ton of money right now. Cash.

    They’ve got no where to put it! Life isn’t all that pretty for supply siders right now. They can cut costs and optimize production / inventory, but that’s about it. Growth beyond that is just tough. Way too many of us don’t have the bucks, and no dollars = no demand = no growth = no meaningful investment opportunities, unless you like high value Silicon Valley, funny money valuations…

    So gas spikes back up, and that’s what I think it will do when the game ends.

    That small stimulus goes away, and could even turn into an anti stimulus, which is good for big energy, but it will suck really hard for everyone else. Lots of costs go up right away, liquid dollars out there goes down, and then what?

    #17481
    Brianl
    Participant

    For investors and those in the energy industry, it’s not good.

    For consumers, it’s outstanding.

    I like it for one main reason – low oil prices keeps crippling Putin more and more. Coupled with the economic sanctions that the West has put on Russia, and their economy is in the shitter. Of course, his response is to (unfortunately) go the North Korea (read: Soviet) model and let his people starve, his infrastructure collapse, while beefing up the military.

    Now that Iran is back in the game and the embargo has been lifted on their oil, I imagine that it’s going to drop a bit more before stabilizing. And China’s shaky economy at the moment is going to keep their consumption down.

    #17498
    Vitalogy
    Participant

    I think the drop in the stock market recently is overreaction (as always is the case when the market does this up or down).

    Oil demand continues to go up, but production has gone up more, so we simply have what’s called a supply issue. Some people misread the fall in the price of oil to a demand issue, which it’s not. An issue with demand would be more worrisome for the world economy.

    The US economy is 70% consumer spending based. Lower oil prices are a direct stimulus to the bottom of the economy all the way up to the millionaire business owner. As an example, a local Portland area heating and cooling contractor who has a fleet of vans is saving about $20K per month on gas according to my friend with inside knowledge (we had a chat the other day about oil). That business that’s seeing a $20K savings per month could hire 6 new employees at $40K per year. Or buy more equipment or other stuff with that savings.

    I’m not sold on the fact cheap oil is the end of the world. Unless you’re Saudi Arabia. They’re fucked.

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