The US economy’s relationship with oil is changing
Dec 02, 2018 (Agencia EFE via COMTEX) —
New York (USA), Dec 1 (efe-epa).- In the past, when the United States imported most of its energy needs, declining oil prices were a bounty to households and businesses, according to a Dow Jones Newswires report made available to EFE on Sunday.
A rule of thumb was simple: Oil-price drops boosted US economic output.
That’s become more complicated. As the US has risen to become the world’s largest oil producer this year, a growing chunk of domestic investment, manufacturing output and employment has become tied to oil.
Now, when oil prices fall, it risks hurting investment and hiring in important parts of the economy.
At the same time, a decades-long transition toward more energy-efficient living has left businesses and consumers less sensitive to prices at the pump, meaning they don’t benefit as much when prices fall.
Some economists still believe lower oil prices are a net economic positive, but the resurgence of the US oil industry has upended the conventional wisdom held by many, including President Donald Trump, who has recently issued a flurry of tweets calling for even cheaper crude.
“Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!” Trump tweeted on Nov. 21.
Oil companies, setting capital-expenditure plans for the next year, could be spooked into cutting budgets if prices keep sliding. Crude oil futures have lost a third of their value in less than two months.
“He’s living in the old world,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said of Trump’s comments in recent weeks cheering the price declines. “That’s the very last thing he should be wishing