Posted November 25, 2014 - Now what kind of a ridiculous statement is that? It's great news! Especially with the holiday season approaching. Families can now afford to go see grandma by piling into the gas guzzling SUV and avoid the airport all together. At first glance, lower gas prices means people have more disposable income to jump start the economy through spending the money that was generally spent for fuel. We all understand the concept but once upon a time not that long ago, the U.S. was faced with the S & L scandal that swept the nation in the late 80's.
Michael Webber, deputy director of the Energy Institute at the University of Texas at Austin says oil producers in Texas and Oklahoma went bankrupt, "which caused a lot of land deals to go bad— because the land had been overvalued, which caused tens of thousands of savings and loans to go bankrupt and belly up, which caused a nationwide S&L scandal, which eventually led to recession."
Oil has plunged to $79 a barrel from $107 in June on fears of a global glut. Many expect these lower prices to stick around for a while. Some fund managers see oil falling to $60 a barrel if OPEC does not agree to a significant output cut. If the cost per barrel goes any lower, investors will be less willing to take risks and drill less causing harm to many of the drilling communities that rely on the oil industry.
Look, were not saying that lower gas prices are going to lead us into a recession. I don't believe the government is going to let that happen again. Just ask the auto industry. What we do know is that every cause has an effect. At some point, the gas prices will go back up. The question is what's going to happen to the industry in this in between stage? How many people are going to be affected?
We believe that there is a happy medium. Let's lower the prices enough to boost the economy but not enough where the oil industry can't make a profit. It sounds easy right? Somebody give them my number!