One of the biggest business stories of 2014 has been the dramatic drop in oil and gas prices in the U.S. But while motorists are enjoying the tumbling prices at the pump, the impact on the economy is more mixed.
According to a report by Resources for the Future (RFF), a nonpartisan think tank in Washington, D.C., lower crude oil prices are having uneven economic benefits across the country, while also also increasing oil-related pollution.
RFF does note that falling oil and gas prices have been a gift to U.S. consumers, boosting Americans’ annual disposable income by $350 billion, or 2 percent of U.S. gross domestic product. That amounts to a total gain of nearly $2,800 per household.
But some of that increase in consumer purchasing power will be offset by reduced income for the nation’s oil producers. “Because the United States now produces more than two-thirds of its oil consumption,” the group states, “only $116 of the increased consumer spending power comes from foreign oil producers. The rest comes from domestic oil producers.”
Taking into account U.S. oil companies’ lost income, RFF calculates the net gain in household income at just over $900 per year.
The economic windfall of the oil boom also is not being felt everywhere across the U.S. RFF says that while 42 states and Washington, D.C. are enjoying an economic boost from lower oil prices, eight states that depend on energy production — Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, Wyoming and West Virginia — are being hurt (see map at bottom).
Lower and stable oil and gas prices in the U.S., meanwhile, could lead to further geopolitical instability in countries whose economies are dependent on oil production — nations like Russia, Iran and Venezuela.
And in keeping with human nature, lower oil prices mean more Americans have been buying larger and less fuel-efficient cars and trucks, which in turn contributes to rising air pollution levels, the group says.