Cheaper prices at the pump• $2.72: Price per gallon Tuesday at Sam’s Club on Lee Highway• $2.89: Average Chattanooga price per gallon for regular gas on Tuesday, down 22 cents a gallon from a year ago• $3.19: Average U.S. price for regular gasper gallon on Tuesday, down 26 cents a gallon from a year agoSources: Gasbuddy.com, AAA fuel gauge price survey
Gas prices tileIf you’re a driver, a shipper or an airline, low oil prices sure feel nice. But there are downsides to the recent plunge in oil prices — for the oil industry and for the economy.
Low fuel prices can help boost economic growth by reducing fuel bills and leaving consumers and companies with more money to spend on other things. Problem is, two factors behind the oil-price drop — a weaker global economy and a stronger dollar — could hurt the U.S. economy by reducing exports, employment and spending. And all that, in turn, could outweigh the economic benefit of cheaper fuel.
“Initially, (a lower oil price) will provide a boost to an economy that already has some momentum,” says Diane Swonk, chief economist at Mesirow Financial. “It’s like a tax cut. The problem is that it will come back to haunt us in 2015.”
A boom in U.S. oil production, which has helped reduce dependence on foreign oil, has been propelled by high prices. Drilling in some areas of North Dakota and Texas, for example, produces only a slight output per day. If prices fell further, drilling would have to slow because it would no longer be profitable.