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Low Gas Prices Could be Damaging to the Economy?

There was a time that paying $4 for a gallon of gas was the norm. Currently the national average price for a gallon of gas is around $2.70. Recently my wife filled her tank and it cost her $37. This time last year the cost to fill her tank was $50. This price change is leaving more money in the pockets of Americans. This is a great thing since people can now spend more money on other things. I remember hearing during the 2012 presidential campaign Newt Gingrich talk about having $2.50 a gallon gas. He suggested that we eliminate the EPA, build the Keystone pipeline and allow more drilling. Guess what we are almost there now and all we have done is drill more. You would think the news of lower gas prices would make everyone happy. Unfortunately that isn’t the case. Several states rely heavily on high energy prices for their state revenues. These states include North Dakota, Texas and Louisiana. These states benefitted greatly from $100 per barrel oil. In Louisiana state economists calculated that because of the falling price of oil and unexpectedly low personal income tax receipts, the state is going to come $171 million shy of anticipated revenues for this fiscal year, which ends June 30, 2015. This will likely force budget cuts in Louisiana.

Some have strongly advocated that more drilling and lower gas prices would solve all of our economic problems. Now it appears that’s not the case at all. I believe that things will be fine once everyone adjusts fully to the new pricing. The key however will be how states that rely heavily on higher oil prices for revenue adjusts. Perhaps they will look to diversify their economies by investing into additional revenue resources or perhaps take a wait and see approach. Meanwhile consumers I believe will take advantage of this new found wealth. I predict that there will probably be a boast in revenue for the tourism and automotive industries as consumers look for ways to spend the extra cash. Gas prices are finally lower again. My message to American consumers is to sit back relax and enjoy the ride while gas prices are at this level.



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