More than 80 percent of RBJ Daily Report Snap Poll respondents think the impact of falling crude oil and gas prices is positive, and 71 percent say it is good news for their business.
The average price of a gallon of regular unleaded gasoline nationwide hit $2.50 on Wednesday, down from $3.23 a year ago and $3.68 in June—a 32 percent decline. In Rochester, the average price was $3.00, down from $3.65 a year ago.
A gas station in Ohio on Monday sold gas at $1.85 per gallon, according to data compiled by GasBuddy.com.
The falling cost of gas has been driven by the plunging price of oil, reflecting global economic conditions and the U.S. shale-oil boom. On Friday, crude oil prices hit a five-year low. West Texas Intermediate fell to $56 a barrel from more than $100 in June.
The economic impact of falling crude oil and gas prices can be mixed. For consumers, lower gas prices are like a tax cut—by some estimates, already equaling several hundred dollars a year per household. Many industrial firms also save money on transportation costs and petroleum-based supplies.
But a big drop in prices also can cause a cutback in investments by energy firms, hurting businesses that are suppliers to the industry. It also can signal economic weakness—the Dow Jones Industrial Index plummeted more than 315 points or 1.8 percent last Friday after the forecast for global oil demand was lowered for the fifth time in six months. For the week, the Dow was down 678 points, or 3.8 percent.
Roughly 500 readers participated in this week’s poll, conducted Dec. 8 and 9.
On balance, do you think the impact of falling crude oil and gas prices is positive or negative?
Very positive: 48%
Somewhat positive: 34%
Somewhat negative: 10%
Very negative: 2%
For your business specifically, what is the likely impact of lower crude oil and gas prices?
Very positive: 33%
Somewhat positive: 38%
No impact: 26%
Somewhat negative: 2%
Very negative: 1%
I am a retiree living off my investments and personally have taken a “big hit” in the stock market, more than I’ll ever make up from lower gas prices. However, for the average middle- to lower-income person—i.e.; the majority—it has been a major bonus!
—Hal Gaffin, Fairport
Only the energy sector is negatively impacted by falling oil prices, including oil producers and supporting industries. Virtually every other sector of our economy benefits via lower energy costs. Global weakness is only a portion of the cause for falling oil prices, including increased production and energy efficiency being the other pieces. The stock markets are overreacting and will bounce back.
—John Midolo, managing partner, RCM Strategies LLC
Like other economic incentives, it’s great for some, and not so good for others. My operation will cost less to operate—but my petroleum stock has tanked! That’s life!
—John Sackett, Sackett Farms
We all enjoy paying less for a tank of gas. But I am reminded of an old “I Love Lucy” episode. Lucy is driving with Ethyl and the tank is nearly empty. Lucy steps on the pedal and Ethyl asks her what she’s doing. Lucy replies that if she steps on the gas, they’ll get to the gas station faster (before the gas runs out). Petroleum is a finite resource, folks, and we are going after things like the dirty tar sands because we have depleted all the easy pickings. There is no smart choice here other than converting to 100 percent renewable energy. The sooner the better!
—Margie Campaigne, Margie’s Green Home Consulting
If America stays on the path to energy independence, we will return to manufacturing again and “making things” back to this country. All economies require energy. The cheaper it is and with 100 percent independence, you have a global, significant competitive advantage. That said, our politicians will figure out a way not to achieve this. The trickle-down effect of energy independence at low cost will also create jobs and fill tax coffers. But our politicians will spend it willy-nilly to get re-elected instead of paying down all of our debts fiscally and the $100 trillion plus of unfunded liabilities. An America debt-free and low-cost energy independent is a rebirth of our republic.
—Dave Rusin, Pittsford
Less spent on fuel (and the energy infrastructure), the more our customers have available to purchase durable goods that persist longer than a BTU.
—Dorver Kendig, Webster
When gas prices are going down, Americans as a whole have more money to either save or spend on something else. So where one market may fall, another will pick up at least potentially.
If it helps to bring down Putin, whose Russian economy is highly dependent on the price of oil, it’s a good thing. He sank much of Russia’s resources into building the oil and gas industries to make himself and his cronies rich. The result is a currency that has lost 50 percent of its value since March.
—Irene Burke, Burke Group
The current price move will slow production of oil and natural gas from shale, reducing supply and driving the price back up. A new trading range for oil will be established, and we’ll stop talking about it for a while. Meanwhile, we should consider low prices a Christmas gift and enjoy it while it lasts.
—John Calia, Vistage International
The negative side of lower prices at the pump is that it discourages people from conserving as shown by the rise in sales of SUVs and other larger, gas-guzzling vehicles.
The savings from fuel costs will help consumers and businesses alike. Redirecting that money to other purchases will certainly help spur the domestic economy. The downside will be the pain it causes our resurgent domestic oil producers. OPEC knows what they are doing, trying to “snuff out” American producers. Then they will be free to price gouge us once again! We cannot let that happen! Let’s hope our government is smart enough to not let that happen by offering tax incentives to keep the U.S. energy train rolling. Lord knows, the Feds subsidize many foolish and much less noble causes than U.S. energy independence!
—George Thomas, Ogden
The decline of the stock market and the decline of gasoline prices are not related. The market has been overpriced for months; a serious correction was overdue. Gas prices reflect nervous speculator activity. Global suppliers continue to pump at rates necessary for five to eight years ago. In short, bad news in stocks is largely unrelated to lower gas prices for Main Street.
—Wayne Donner, Rush
Lower gas prices help defray higher cost of living, but I think they need to stabilize and not go too far the other direction. Sure wish New York would lower their gas taxes. We are always higher than most other states. Let’s look for ways to get natural gas and pipelines going here in the U.S.
Unfortunately, there are two sides to every coin: ditto this phenomenon. Some win, some lose.
—J.A. DePaolis, Penfield
Anything that encourages people to spend a little extra money on something other than fuel is good.
—Rich Calabrese Jr., Rochester
Globally, the reduction may have serious negative effects. Russia will suffer significantly, but other related economies will feel the pain. For the “common man/woman,” the cost of a gallon of gas will decline, but nowhere close to proportionately to the lower per-barrel cost.
—Tom Gillett, NYSUT
Hopefully, a result of falling gas prices with their attendant lowering of profits for the big energy companies will motivate them to start putting their resources into alternative forms of energy instead of continuing to chase scarcer resources with more expensive and environmentally damaging processes.
—Alan Ziegler; Rochester Area Business Ethics Foundation
A drop in oil prices helps some and hurts others. Lower oil prices puts more money in my pocket and makes it easier for my patients to pay my bills. Lower oil prices helps retailers keep prices low and reduces the cost of transportation of goods. Part of the reason for the low oil prices is the slowing of most of the world economies. Another reason for the low oil prices is that the Saudis have kept pumping crude at a high rate. Some think this Saudi action is to put the U.S. oil business out of business. If President Obama wanted to really hurt our oil business and please the environmental lobby, he would sign the bill approving the Keystone XL Pipeline and drive prices even lower.
—Clifford Jacobson M.D.
12/19/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email firstname.lastname@example.org.