Oil Prices Down 35% Since Mid-July
By: Jeff Quinn
Oil prices have been dropping at a steady rate since mid July when prices hit a record of $147.27. As of Monday oil ended the day trading at $95.71. While this is good news for those of us concerned about the price of gasoline at the pumps, its drop in price is just another sign of the struggling economy.
The main factor driving the price of oil down is the drop in levels of demand. Also helping keep prices lower was the fact that the U.S. refining capabilities and oil rigs in the Gulf of Mexico were able to survive the recent hurricanes relatively unscathed. With the economy struggling people have tried to cut back on any unnecessary travel.
For consumers hopefully these price drops will soon be reflected at the pumps. It is ironic because these prices are lower due to the rough time the economy is having but lower gas prices may end up helping the economy by putting more disposable income back into the pockets of consumers. Prices remaining in this range would also help lessen the economic hardship that was expected to be created due to home heating oil costs this winter.
It will be interesting to see if these prices are able to stabilize in the coming weeks or if they will begin to climb again as demand for home heating oil increases as winter approaches.
http://money.cnn.com/2008/09/16/markets/oil/index.htm?postversion=2008091609
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This is definately big news and can lower the prices of gas at the pump. I do think prices of oil will rise once the winter months come, especially as the demand will increase and oil will be used to diversify most investment portfolios as this increase in demand will occur.
ahmedmadry - September 16, 2008 at 3:03 pm
This excerpt comes as a shock to me because I, a consumer of oil, would expect that a drop in oil prices would be good for the economy. While demand may be decreasing for consumers in the oil market, one should expect that consumers spend their more disposable cash in other aspects of the market because of the stream of money. However, there are many possibilities in terms of the effects on the economy with this decrease in demand for oil because of all the turmoil that currently exists. Consumers may want to save their extra cash saved on oil prices and invest it elsewhere. I think this excerpt is important in pointing out that the current United States economy has endless paths that it may take. No one, including the Fed or economic forecasters, can truly be certain of where we are heading economically as a nation and the drop in oil prices forces us as consumers and citizens of the United States to take a first look into this.
joshgoodman3 - September 16, 2008 at 4:44 pm
The residual income will probably provide a short term boost for the economy; however, over the past couple of months the price of oil has been extremely inconsistent and it’s bound to go back up. Many people have blamed oil prices for the downward spiraling economy including myself, but this article proves that oil is not the sole reason, it’s only one piece of the puzzle.
scottlepkofker - September 16, 2008 at 7:55 pm
I do feel that this decrease in oil prices can prove to be a stimulus to the economy. However, I do not feel that these prices will stay at the level they are at. America is too dependent on oil and automobiles as signs of status for the demand to stay low forever. Oil prices will rise back up once the economy comes out of this recession. It will be interesting to see if consumer spending does increase from this event.
jakekuss - September 17, 2008 at 1:08 am
Although the price of oil has dropped per barrel, many locations around the US have reported that prices still don’t reflect this drop at the pumps. Consumers have noticed only a slight decrease in gas prices at the pump. It will take several weeks before our country’s consumers feel any relief from the falling oil prices.
jasonhong1 - September 17, 2008 at 1:37 am
It will take awhile for our economy to even show an impact from lower oil prices. There were so many implementations to counteract rising oil prices (in an example, air lines charging for baggage, and drinks) that even if oil is dropping in price, the amount already paid out to cover the extreme rise will need to be made up. I am skeptical that lower oil prices will help alleviate consumers at this point. Business will feel the effects, and then eventually pass that along to the consumer. That is, if in fact, oil continues to drop.
jamielkelling - September 17, 2008 at 3:23 pm
It makes sense to say that a drop in oil prices will help our economy, but considering that our economy is in a hole that you can barely see the light. I don’t think you will see the effects for a while. Also, it was interesting to see that you stated how demand plays an integral role in the price of oil, but how does demand fluctuate over time? I always thought demand for oil would always be high.
tomflynn0529 - September 18, 2008 at 12:57 am
This recent drop in oil prices is good news for the American consumer for the short term. But what the consumer really needs is steady, consistent, low oil prices. The amount of fluctuation and uncertainty in the oil prices leads to consumer uncertainty for the oil markets and for the general economy. What the American consumer needs is steady, low oil prices and a steady, healthy economy.
andrewrobinson01 - September 19, 2008 at 4:29 pm