Falling oil prices mean cheaper gas, and that makes most of us pretty happy.
Over time, though, cheap gas isnt always a good thing.
It can have a big impact on the economy, and, in turn, your wallet.
Canadian and Iraqi oil production and exports are rising year after year.
Even the Russians, with all their economic problems, manage to keep pumping.
OPEC(Organization of Petroleum Exporting Countries) has a lot of power in stabilizing these falling prices.
Governments around the world have been urging OPEC to slow down production and stabilize the market.
According toAAA, consumerssaved over $115 billion in gas last year.
Economists say cheap oil also slows inflation, too.
Which is great for the everyday consumer, at least in the short-term.
If prices are this low for the next year it will be a pretty big boost to consumers.
He adds that, over time, though, things have a way of leveling off.
Well get used to lower prices and spend more elsewhere.
Interestingly, youd expect flight prices to drop, too, as airlines save money on fuel costs.
But that hasnt happened yet.
In short, the big playersDelta, Southwest, United, and Americanjust wont compete with each other.
The Risk of Deflation Destroying the Economy
Slow inflation isnt always a good thing.
To understand why, imagine you own a factory.
To make your product, you first must purchase parts and raw materials.
You promise workers a certain wage.
You borrow money to expand.
But what if prices start falling?
Suddenly, you cant afford to repay your loan or live up to your contract with workers.
You cant afford the parts that already are sitting on your inventory shelves.
You have to start selling products at a loss, even as your competitors are slashing their prices.
In short, falling prices mean businesses suffer, which means people lose jobs and stop spending money.
Eventually, we run out of money and start defaulting on our loans and mortgages.
Then, banks suffer, and the whole economy is in a giant slump.
Some worry these falling oil prices will eventually lead to deflation andcause a recession.
Its hard to predict the future, but for now, thats just a fear.
Some Economies Are Suffering, Though
Thats not to say its all good right now, though.
While some of us are enjoying the savings, many others are feeling the blow of cheap oil.
My parents are a perfect example of the impact of cheap gas on the economy.
My dad, who owns a small business in the energy industry, is feeling the pain.
Energy companies arent making as much money, so theyre not buying his services.
Oil producing countries and states have been feeling this blow for a while now.
Jobs are drying up.
Wealth inequality issues are getting worse.
Low oil prices have an impact on countries around the world.
Obviously, theres a huge global impact to lower oil prices.
Low prices weaken the energy sector.
This puts a bit of a dent in the overall economy, too.
In the meantime, all we can do is enjoy that super cheap gas and hope for the best.
Illustration by Sam Woolley.
