The Impact of Oil Prices on the Market and America’s Wallets
March 23, 2015
By Marc Fogarty, CPA, CFE
The American production of oil continues to outpace the rest of the world despite instability of market prices. The price per barrel of oil hit a six-year low in January but has gone back up recently due to high global demand and colder than usual temperatures in the Northeast U.S., which increased demand for heating oil.
While Wall Street may be nervous about the negative impact of the instability of oil prices, consumers and businesses that are able to take advantage of lower prices at the pump can use those savings to spend more and possibly invest more. When gas prices fall, consumer confidence rises.
In addition to the benefit of consumers having more money to spend on goods, businesses also benefit from reduced expenses. When gas prices decrease, retailers can save money on shipping and transportation costs which leads to higher profit margins. Those higher profits can, in turn, make the company more attractive to investors.
While Americans continue to debate the pros and cons of oil production issues, Saudi Arabia and its Gulf allies claim to not be worrying about news headlines on fluctuating oil prices. Their per-barrel production cost remains much cheaper than many of their competitors and they are focused more on protecting their global market share.
In the meantime, Americans can continue to enjoy the benefits of cheaper prices.