Why Low Oil Prices Haven’t Helped The Economy

13 Apr 2016   Economy, Prices, USA

Many analysts had anticipated that a dramatic drop in oil prices such as we’ve seen since the summer of 2014 could provide a big stimulus to the economy of a net oil importer like the United States. That doesn’t seem to be what we’ve observed in the data. There is no question that lower oil prices have been a big windfall for consumers. Americans today are spending $180 B less each year on energy goods and services than we were in July of 2014, which corresponds to about 1 percent of GDP. A year and a half ago, energy expenses constituted 5.4 percent of total consumer spending. Today that share is down to 3.7 percent. (Click to enlarge) Consumer purchases of energy goods and services as a percentage of total consumption spending , monthly 1959:M1 to 2016:M2. Blue horizontal line corresponds to an energy expenditure share of 6 percent. […]

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