Drivers smiling, experts mixed on lower gas prices

The sign says it all and experts think prices may fall further.
Staff Writer

Save some. Spend more. Take a trip. Hope it lasts.

All those and more are responses from area drivers as they see gas prices drop below $2 a gallon when just two months ago, experts were warning prices might get back to $3 a gallon o more.
It couldn’t come at a better time for retailers as consumers have more money in their pocket heading into the home stretch of Christmas shopping.

The last time prices dropped dramatically was in 2016 and analysts figured lower gas prices put more than $100 billion in consumers’ pockets in a short period of time.
And one would think lower prices, especially if they last, would be a boon for the economy, benefiting everyone from airlines and trucking companies who spend big parts of their budgets on fuel to hotels and travel companies who cash in on more travelers to consumers who benefit from the trickle down of lower transportation costs.

Based on a non-scientific, random survey of drivers, the possibilities aren’t lost on consumers, even if their thoughts are more wallet-savvy than economic theory.

“I couldn’t believe it, I was driving along yesterday and saw the sign with the $1.99 price. It made me feel better, just something about that magic barrier,” Connie Dalton said Wednesday afternoon as she filled up her car.

“Since November, I think it’s down 50 cents a gallon. My car holds 14 gallons and I fill up about twice a week. What’s that, $14 a week savings. Do that a few times and it’ll get your attention,” echoed Jimbo Stanton, who was pumping gas next to Dalton.

Just about everyone has noticed the decline. Some said it already has impacted their spending habits. Others say they aren’t sure.

“I may spend a little extra at Christmas,” Mattie Joiner said. “I won’t feel as bad about it if I do.”

“We have decided to drive somewhere at Christmas to see family because the cost is lower. Three months ago we weren’t going to. But we figure we’ll save more than $100 so we can afford it,” Anita Cantrell explained.

That all sounds like it should boost the economy, more purchases meaning better days for retailers, makers of consumer goods, banks and credit card companies.

And some experts say that could be the case if a variety of other factors hold true.
But lower gas prices, which are like a big tax cut padding people’s pockets, no longer are a slam dunk to improve the economy.
Shale oil exploration has changed the dynamics of the laws and supply and demand.

That reaches even into the the Golden Triangle, especially northern Lowndes County and southern Monroe, where several fracking operations are in place.

The U. S. today is not only the largest consumer of oil, it also now is the top producer, surging past Russia and Saudi Arabia for the first time since the early 1970s, according to the Energy Institute.

While many people, including President Donald Trump, want oil prices to keep falling, those lower prices have consequences.
In fact, the economy did not do well in 2015 and 1016 when oil prices plunged.
“Overall, if the patterns hold true, lower oil prices actually end up braking even on the economy.

Some sectors gain, others lose. My guess is that in your area, folks mostly will be smiling. But watch out for steel and some of those things, they could feel a little impact if mining and drilling and related industries take a hit,” said Elston Rivers, a retired economist who now advises private clients.
But many residents of Texas, North Dakota, Alaska and other oil-producing states are not celebrating. Crashing oil prices can threaten their livelihoods. 

"The decline in oil prices is not an unalloyed good. The benefits are dispersed but the hits are geographically concentrated,” PNC chief economist Gus Faucher told CNN last weekend.

Faucher agreed the impact of cheap oil is likely neutral on the overall economy.
Ian Shepherdson, chief economist for Pantheon Macroeconomics, used recent history to illustrate what could happen.

In 2014 to 2016 oil crash, gas prices fell by more than half, according to federal government numbers. That boosted consumer spending, but economic growth in the U.S. slowed from above 3 percent in early 2015 to below 2 percent the next year.

The drop in investment in mining and related industries and the jobs they support fell by about the same as consumer spending rose, according to Shepherdson.

Depending on how long it lasts and how certain segments of the economy react, the negative side of cheap oil can spill over into steel, manufacturing, real estate, transportation, logistics and banking.

All told, Shepherdson estimates that the oil crash wiped 0.3 percentage points off US GDP growth in 2014 and another 0.2 percentage points in 2015. 
"In the shale new world, lower oil prices mean slower US growth," Shepherdson wrote. 

Trade with China, economic growth in other parts of the world, and a variety of other factors also could play a role in how the economy shapes up in the next six to 12 months.
For the academic and economic wonks, it’s plenty to analyze. For Jane and John Doe on the road, not so much.

“You see this smile, you see that price, they are related,” Jerry March said, pointing at the gas pump. “That’s all that matters right now.