The price of oil has plummeted since June, and Barclays analysis suggest that’s a net positive for the U.S. economy. The WSJ reports:
Lower prices mean U.S. consumers and businesses will spend less on oil. While the U.S. imports less oil than it did, it is still a net importer oil. That means a lot of the money that would have otherwise gone overseas will be spent instead on U.S.-produced goods and services.Barclays chief U.S. equity strategist Jonathan Glionna estimates that a 20% decline in gas prices results in approximately $70 billion of consumer savings.
Of course, the big caveat here is the potential effect a low oil price might have on the American shale boom. Booming U.S. crude production is one of the reasons oil prices continue to fall, as it contributes to a global oversupply. But fracking can be expensive, and if crude continues to tumble, some shale plays will cease to be profitable.For now, the majority of shale production looks safe from the bear market, though that could certainly change. In the meantime, the world’s petrostates, which require a much higher price of oil just to balance their national budgets, are feeling the pinch, while American oil continues to flow and the U.S. economy reaps the benefits. As in the Goldilocks fable, it’s not high enough to fill Putin’s coffers or constrain economic growth, not low enough to seriously impact the shale revolution, but seems to be just right, at least for now.