Tuesday, December 29, 2015

Low Oil Prices Good?


I must admit that in recent weeks a big smile comes to my face each time I pull into buy gas and the price has fallen once again. Especially the past few days as I traveled to see family over the Christmas holiday. However, while millions of Texans are enjoying a break at the gas pumps, tens of thousands of our fellow citizens are out-of-work and facing foreclosure because they are broke.

Some people believe that low oil prices are good for the economy, because they allow consumers to spend more money on other retail items and travel. However, just as many other folks believe low gas prices are a predictor that big economic problems are just around the corner. I'm not sure what I believe when it comes to these two schools of thought.

Understanding Oil Prices: A Guide to What Drives the Price of Oil in Today's Markets

I do believe a major contributing factor to the most recent decline in oil prices is due to the decision of the Obama administration to negotiate with Iran to remove sanctions and that decision caused the oil market to crash simply because Iran had so much oil just sitting around with nowhere to go. Now it will flood the marketplace causing a glut of petroleum.

I hard truth is that when oil prices get too low, the net effect on the Texas economy is a negative one. It's difficult to remain happy with low oil prices when they end up costing our friends, neighbors and family their jobs. That said, for decades the oil and gas business has moved between boom and bust markets and that system is likely to continue for many years to come.

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