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Friday, December 26, 2014

Lower Gas Prices Will Spike The Economy

When it comes to oil, as a general rule, there is one big factor that I consider. Oil is deeply embedded in the entire United States economy. For that reason, when oil prices, and especially prices at the pump, reach new low levels, I think the overall impact on the economy is potentially great.

This becomes more pronounced when we think about how much of a negative impact high gas prices have had on the average American family in the past five or so years. Pumping up to get to point B drains spendable cash from the pockets of consumers, and this has an effect on the entire economy. Especially where discretionary spending is concerned. But let's not forget that all of the products we buy must get to point B as well, and much of that transport of goods happens using gas.

It is uncertain how long gas prices, or the price of oil in general, will remain lower. But at least in the short term, the impact of low gas prices in the economy could help to lift up many companies that would be direct beneficiaries of the decline in oil prices.

Those would be the places where discretionary money would most likely be spent.

Companies to look at to invest in the decline in oil prices? Retail outlets, especially those that are a step above stores like Walmart, The Dollar Tree, Family Dollar, and Dollar General. Starbucks is definitely one place that could see more customers willing to spend some of their newfound extra cash on a cup of premium coffee. Restaurants and entertainment venues will fare well as well.

Of course, all of this fresh cash entering the overall economy will have another effect as well. That is, it will help to bolster demand, and that of course can lead to more jobs. Even if oil prices ramp up again, ideally more Americans will be back to work, and the economy will better be able to sustain itself going forward. This recent decline in oil prices, if you ask me, is at the right time, and just what the doctor ordered.

1 comment:

Ramesh said...

Yes agree. From an American consumer's perspective this is all good news. I would add airlines to the list of industries that would benefit - that sector has had nothing but bad news for years, so perhaps their time in the sun should not be grudged.

hat would happen to all the companies and investments made in shale gas. Is there a likelihood of bankruptcies and halting of investments here which would swing the world oil prices bak to the stratosphere. I understand that fracking investments are smaller and more short term, but still .....