How low oil prices are a drag on the economy
It seems pretty simple, right? Cheaper oil means lower gas prices, which means consumers can spend gas money on other stuff. A nice little economic stimulus. But Thomas Tunstall, senior research director at University of Texas at San Antonio Institute for Economic Development, said it’s not cut and dry.
“I got tired of hearing people say, ‘Yeah, oil prices are going down but consumer spending will make up the difference’ and I thought, I don’t think so,” he said.
David Goldwyn, president of Goldwyn Strategies, said consumers aren’t driving that much more, anyway.
“And the amount they’re saving is a pretty modest impact on the economy,” he said.
Goldwyn said the damage to the oil industry is much greater than the benefits to consumers. Those hardest hit were the oil field service companies, like Halliburton.
“What happened when the price of oil dropped is the price that producers were willing to pay for their services dropped dramatically,” he said.
And that means cutting jobs and dropping wages.
Baker Hughes, another drilling services company which Halliburton is buying said this week it would be laying off 11 percent of its workforce – 7,000 people.
That hurts the whole economy.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
