With gas prices now below $2 per gallon in many states, it may seem like this is great to stimulate the economy. But in this Morningstar article, Wes Moss asks the question “Is cheap gas really good”?
While the stock market made new highs and breathtaking lows over the last few weeks, one sector continued to simply fall, dare I say plummet: oil. Down with it went the price of a gallon of gasoline. Headlines warn that low-priced gas can hurt the economy but the benefit of cheap energy on your wallet remains, for now, clear.
In June, a barrel of oil cost $107. Today we are at slightly less than $50 per barrel, a drop of some 47% and more than a five-year low.
Boo-hoo for the likes of Exxon Mobile (XOM), but this sure helped us all at the pump. Nationally, gas goes for $2.20 a gallon on average, according to AAA. To put that in perspective, in June motorists in Atlanta, where I live, paid closer to $3.70 a gallon.
Oil prices dropped since summer for many reasons. First, the slowing economies of China and Europe no longer demand black gold at the old pace. ” Second, new drilling technology, tremendous amounts of new supply here in America and Middle East oil powerhouses deciding to level output all contribute to the persistently higher supply of oil right now.
Read the full Morningstar article here.