Lower Gas Prices In America - Essay Example

Lower Gas Prices In America The oil prices have dropped to about $70 a barrel in America. This happened last week after OPEC decided against cutting production levels. Analysts have seen this as a bid by the Persian Gulf states to challenge the willingness of American oil producers to keep on drilling wells. It is apparent that high oil prices in recent years led the energy boom by making costly drilling techniques such as hydraulic fracturing economically breaking economically feasible in North Dakota and Texas.

This paper is a critical analysis essay about the lower gas prices in America and its impact. The lowering of gas prices is an advantage to America. The prices of gasoline have fallen from $3.68 in the mid-year to $2.77 on Monday, this is according to the auto club AAA analysis. The drop in prices should be a key boost in an era when growth abroad is faltering even though it may curb investment in the expanding energy sector. According to the IMF chief on Monday, she said that the falling oil prices will be of help in boosting the economies in the U.

S and across the world. Lagarde also projected the U.S economy to grow at a 3.5% rate as at next year (Timiraos, 2014). The lowering of gas prices in America means that the people will have more to spend. It is apparent that Americans will have a bounteous Christmas due to the Saudi discounts from crude oil at a time of falling global demand. In my opinion, the American economy will get a multibillion-dollar increase during the Christmas season and beyond. The impact will be significantly more for the low and middle-income Americans who have been left behind by the economic recovery that began in 2009.

It is apparent that American household uses 1,200 gallons annually so if the prices continue to fall the people will save 15% that is about $400. In my opinion, this extra cash in shoppers will lead to a generation of half a percentage point in the economic growth at the end of the year (Schwartz et al, 2014). On the other hand, the falling oil prices will have a negative impact on the producers. The low prices will lead to slow domestic oil and gas production. Thus, dimming one of the economic bright spots of the decade.

The low prices will also make it difficult for companies to explore costly oil shale deposits and the deep offshore reserves. The economists argue that the overall momentum will compensate for an expected slowdown in the energy sector. In Texas, it is estimated that there will be a loss of 15,000 energy production jobs. In the other sectors, there will be increased employment such as in transportation, refining and businesses depending on consumer spending (Schwartz et al, 2014). In conclusion, I am of the opinion that the falling of gas prices has benefit to consumers that outweigh the loss to producers.

The author projects that the consumers in America will save 15% of their annual consumption which makes them have more money to spend. The fall of prices will lead to loss of jobs in the oil companies while it will create more jobs in the transportation and refining sectors. Finally, the low prices will make it difficult for companies to explore costly oil shale deposits and the deep offshore reserves.Work CitedSchwartz, D. N., Krauss, C & Searcey, D. Sliding Oil and Gas Prices Give Americans More to Spend.

New York Times. 13th Nov 2014. Retrieved on 2nd Dec 2014. http://www.nytimes.com/2014/11/14/business/economy/lower-oil-prices-give-a-lift-to-the-american-economy.html?_r=0Timaraos, N. Lower Gas Prices: How Big a Boost for the Economy?. Wall Street Journals. 1st Dec 2014. Retrieved on 2nd Dec 2014. http://blogs.wsj.com/economics/2014/12/01/lower-gas-prices-how-big-a-boost-for-the-economy/?mod=WSJBlog&mod=marketbeat