Oil/Gas prices and the economy

With the global stock market off to its worst start of the year ever, many are wondering what is causing this trend and what it means for the United States economy. The answer can be found in the oil and gasoline industry, where we are seeing some of the lowest prices for these items in the last decade.

Oil and gas prices have been dropping so much because, simply, there is a large supply of it. This sudden drop in price is great for consumers like us, but hurts the global stock market because the companies that sell the gas and oil are not making as big of a profit as they once were before. This in turn has brought down the energy companies’ shares in the stock market by nearly 10 percent. The price of oil has now fallen so low that investors believe that this could mean global economic growth is much weaker than expected, which could hurt all companies.

Normally, lower prices on gas and oil would signal that the economy is in good shape. However, in this instance, one could argue that since the profit drop is so low it could drag down entire companies and indexes within the stock market. The production of oil in the U.S and many other countries has not changed significantly during this time, and with international sanctions against Iran being lifted, there could be even more oil resources available than before. Nearly 10 years ago, during the financial crisis, U.S consumers were worried about gas and oil prices being too high, and now with prices decreasing as they are, we have become worried about prices being too low.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s