The norm of the American economy for decades has been that when oil prices rise, the economy melts down and when the oil prices fall, the U.S. economy grows.
There has been decline in the prices of oil for the past two years. According to the axiom of the U.S. economy, the economy has to have seen a significant growth. But, this has not been the case. Even though there have been some economic benefits, there is not a major growth seen in the last couple of years.
The oil prices have fallen to less than $30 a barrel in the United States. This is happening for the first time since 2003. But, analysts are of the belief that the lower oil prices will not have a telling effect on the American economy in 2016. The losses from the lowering of oil prices are larger and have come quicker. The oil companies decided to cut back on their investments as well as lay off workers in order to reduce their losses. The gains due to the fall in the oil prices are smaller and they take a lot of time to materialize.
Even though the lower prices will help in boosting the economic growth in the country, the increase could be as low as 0.1 pc. There are other problems that have arisen due to the decrease in the oil prices. There is a correction that has been done in the global equity markets due to the drastic reduction in the crude oil prices. It is now having its say on the inflation and has resulted in the Fed to increase the interest rates by a percent this year.
The investment in the oil and the gas industry has reduced drastically despite the fall in the prices. The decline in the oil prices has made the US economy to just have a little gain. The Fed will have to think over this problem on a serious note and take it as a forthcoming economic meltdown. It will have to come out with some contingency plans to save the US economy from plummeting.
There are many economists who believe that the situation is not a bad one as of yet as the spending among the consumers and the growth in the employment sector is still healthy. They believe that the increase in the expansion of the oil and gas drilling domestically has changed the way how the oil prices are affecting the economy. Clicking Here will take you to an article that shows the implications that US could Face When it Lifts the Oil Export Ban.
The energy producers are facing huge losses due to lower oil prices despite the boom that is seen in the oil and gas extraction locally. The increase in the production of oil and gas in the country has reduced the imports of the oil. The consumers benefited as they were able to save dollars at the pump and this has hit the local oil and gas producers.
The consumers are hesitant to spend more from their savings as they were not sure as to whether the lower prices will last. But, once they find that the lower gas prices will continue, you can see them spending more.