GAS PRICES GO DOWN…OBAMA GOES UP?…UNDESERVED CREDIT?
“For the State of the Union Speech, First Lady Michele Obama hosted a variety of politically pleasing guests in her box. An astronaut, an immigration activist, a gay basketball player – but no oil and gas producer. That’s a shame. The most positive thing that has happened to middle-class Americans in years has been the precipitous drop in gasoline and fuel oil prices. The nation’s oil and gas producers – many of them small companies — can take much of the credit. It would have been nice to see a couple of ten-gallon hats in the presidential box.
President Obama’s approval ratings have enjoyed a bit of an uptick in recent weeks, reflecting a stronger economy and higher consumer sentiment. One of the major underpinnings of that improvement in the nation’s fortunes – and prospects going forward – has been the country’s remarkable increase in oil and gas production.
High-minded commentators not partial to the energy industry have twisted themselves in pretzels trying to portray lower oil prices as a mixed blessing. People filling up their tanks with $2 gasoline know better. A jittery stock market and some convulsions in oil-dependent economies like Russia have confused a simple fact: Americans, and especially low-income Americans, have received a big after-tax boost this year as oil prices have been cut in half. Yes, some jobs will be lost in the oil patch, a few banks will be rattled and certain resource-rich states will suffer a downturn in revenues, but for the country overall the drop is very good news indeed.
The Energy Information Administration recently predicted, “The average household is now expected to spend about $750 less for gasoline in 2015 compared with last year because of lower prices.” In addition, people in the Northeast and Midwest using heating oil and propane to heat their homes will save some $750 on fuel. Those are big wins for average Americans. Bigger, just for the record, than the $500 tax credit for middle-income households that Obama seems so excited about.
With middle class incomes stagnant, the cut in fuel costs is meaningful and could prop up consumer spending. Since those at the lower end of the income spectrum spend relatively more of their budget on necessities like gasoline, the benefits from lower oil prices will be felt most especially by lower-earning Americans. The Census Bureau reports that families earning less than $70,000 annually spent about 6 percent of their income on gasoline in 2013 versus 3.4 percent in households earning more than $150,000.”
Liz Peek spent over 20 years on Wall Street, most of them as a top-ranked research analyst. After managing her firm’s entrance into international research and foray into the market for U.S. equities in Japan, she became Wertheim & Company’s first female partner.