Fox News’ Stuart Varney asked whether falling gas prices are bad for the economy, after several years of that network whining that rising gas prices were bad for the economy. Varney got his information from a Wall Street Journal article that said cheaper gas prices will slow domestic energy production like drilling and fracking. Oh. No. High gas prices are bad, low gas prices are bad. What’s a consumer to do?
WSJ has no real answer to that. Writer Nick Timiraos does say that lower gas prices help consumers with discretionary spending, which is true. He also acknowledges that lower gas prices reduce costs for businesses, which helps their bottom lines and possibly helps them bring down their own prices a little. But then, Timiraos throws this little gem out there:
“But the latest drop is spurring debate among economists over how much falling prices will squeeze domestic producers, a reflection of the far-reaching implications from the nation’s energy resurgence.
High oil prices in recent years drove the energy boom by making costly drilling techniques like hydraulic fracturing economically feasible. Now, oil-rich states could see job growth slow. Producers would see profits tumble. And investors are already retrenching from one of the hottest sectors of the expansion.”
He goes on to quote David Rosenburg, chief economist at money-management company Gluskin Sheff & Associates, who claims that falling gas prices creates winners and losers. According to Rosenburg, though, the overall U.S. economy comes out on top.
The higher prices spurred domestic energy production, particularly with drilling and fracking. Fracking, especially, isn’t good for us or for the planet, but hey, it produces gas and creates jobs, so we’re all good. What WSJ and Faux News are worried about is that falling oil prices, which are sitting right around $80 per barrel right now, mean domestic oil production becomes unprofitable. When it’s not profitable to produce our own oil and gas, we tend to turn back to imports (oil market manipulation notwithstanding; that throws a monkey wrench into everything).
Another problem that Timiraos notes is investing. Investors greedily sucked up bonds on the assumption that gas prices would never fall. When prices do what investors thought could not happen, they whine and cry and pull out, because it means less of a return on all those bonds on which they spent their hard earned money. Greedy investors caused the 2008 economic crash, the housing bubble, and now they’re doing it again in several sectors. Screw the rest of us if the economy falters again because of their work.
Put another way, falling gas prices slows investing in the fossil fuel sector because it shrinks returns. Slower investing means slower growth. Slower growth means less job creation, and so we’re all in trouble if gas gets too cheap. Timiraos quoted Rice University’s Senior Director for Energy Studies, Ken Medlock, as saying:
“If the wheels come off [the investment machine], the energy-producing economies are going to suffer.”
Really? It sounds like investing without considering risks that do, in fact, exist, is going to cause more economic problems for us.
So, of course, it’s our job to ensure that investors and oil companies keep getting their money by hurting regular, everyday Americans. That means high gas prices, and a continuing death spiral for working class and middle class Americans. Here’s an idea: How about we stop entire industries from engaging in risky behavior that will ripple across the entire economy! Or we could increase our focus on green energy and stop worrying about the oil market altogether, but that wouldn’t fit with the Koch brothers’ agenda.
It sounds like Fox News, though, jumped on the question of whether low gas prices will hurt the economy and ran with it, as another way to make President Obama out to be an abject failure. It’s actually surprising that they’re not praising Republicans for the falling prices, instead of doing this.