You would have been hard pressed to find an economist who thought that low oil and gasoline prices would fail to lift U.S. economic growth. The conventional wisdom has been that when oil prices rise, the U.S. economy suffers – when they fall, America benefits.
But as pointed out by writer Binyamin Appelbaum, the decline of oil prices over the past two years has failed to deliver anticipated economic benefits. Oil prices recently fell below twenty seven dollars a barrel, down from more than one hundred dollars a barrel in mid-two thousand and fourteen.
While lower oil prices hurt producers, they act as a tax cut for consumers. Since America is still a net importer of oil, the overall impact should have been positive. But this time has been different. Energy companies have cut back on investment and laid off workers as expected, but consumers have chosen to save more of their windfall than anticipated.
A year ago, economists at JP Morgan Chase predicted that lower oil prices would add roughly 0.7 percent to economic growth in 2015. The same economists now estimate that lower prices might actually have shaved three tenths of a percentage point off last year’s growth rate. Goldman Sachs predicts zero economic impact from lower oil prices this year.
