By NELSON D. SCHWARTZ, CLIFFORD KRAUSS and DIONNE SEARCEY
New York Times
American consumers are going to enjoy a more bountiful Christmas this year, thanks in part to a most unlikely source: Saudi Arabia.
The steepening drop in gasoline prices in recent weeks — spurred by soaring domestic energy production and Saudi discounts for crude oil at a time of faltering global demand — is set to provide the U.S. economy with a multibillion-dollar boost through the holiday season and beyond.
The windfall, experts say, comes at a critical moment, with the U.S. economy on the upswing but facing headwinds from other quarters, including weaker exports because of slow growth overseas. Gas prices recently dropped below $3 a gallon for the first time since 2010, while crude oil prices have fallen by more than $25 a barrel since midsummer, now closing in on $75 a barrel after a further sharp drop in the past two days.
“If oil prices stay between $75 and $95 a barrel, we would see the kind of stimulus package that the Federal Reserve or Congress could never do,” said Douglas R. Oberhelman, the chief executive of Caterpillar, the multinational maker of heavy construction equipment.
The impact is especially significant for low- and middle-income Americans, who have been largely left behind by the anemic economic recovery that began in the middle of 2009. Even as the job market has improved, most workers have received only modest wage increases. Median income remains roughly 5 percent below the peak it hit in 2007.
To be sure, the shifting energy picture will create losers as well as winners. Falling crude prices could eventually slow surging domestic oil and gas production, dimming one of the major economic bright spots of recent years. But while a further decline in oil prices would make it harder to tap the most costly oil shale deposits and deep offshore reserves, economists say the overall momentum will more than compensate for any potential slowdown in the energy sector.
“When oil prices fall, the benefit to consumers outweighs the loss to producers,” said Dean Maki, chief U.S. economist at Barclays. “Investment in oil and gas production is still less than 1 percent of gross domestic product. Consumer spending is 68.5 percent of GDP.”
Even in Texas, the estimated loss of 15,000 energy-production jobs that might occur if lower crude prices persist would be offset by increased employment in sectors like refining and transportation, as well as in businesses that rely on consumer spending, according to Mine K. Yucel, senior vice president and director of research at the Federal Reserve Bank of Dallas.
“There may be some slowing, but it’s not going to be dramatic if we stay around $80,” Yucel said. “If the price goes below $70, we will probably see a tapering off of production.”
In the meantime, the most economically fragile part of the population is already feeling some relief, which is likely to lead to extra spending on a variety of other goods and services.
Penny-pinching has been a way of life for Elaine Murszewski since she was laid off from her tech-support job in 2009, but Murszewski, who is self-employed in the Denver suburb of Aurora, says lower gas prices are already making life a little easier.
“If my clients need me to go to their homes, I don’t have to worry about my gas tank being empty,” said Murszewski, who cobbles together about $900 a month helping two clients organize their offices and run online marketing campaigns.
Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.
Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.