The Econobrowser on why we don’t see a boost to the economy from lower energy prices: http://econbrowser.com/archives/2016/04/why-no-economic-boost-from-lower-oil-prices
The green line is based on an Econ model which estimates expenditures based on lower energy prices; the black line is actual spending…
The Econobrowser: “There is no question that lower oil prices have been a big windfall for consumers. Americans today are spending $180 B less each year on energy goods and services than we were in July of 2014, which corresponds to about 1% of GDP. A year and a half ago, energy expenses constituted 5.4% of total consumer spending. Today that share is down to 3.7%.”
“But we’re not seeing much evidence that consumers are spending those gains on other goods or services.”
However, he goes on to cite a JP Morgan study: “A study of individual credit and debit card transactions by JP Morgan Chase Institute found that at the individual level, consumers did seem to be spending most of the windfall on other items.” And he suggests: “…aggregate consumption spending did get a boost from lower oil prices in the sense that we would have seen much more anemic growth of spending had oil prices not come down so dramatically.”
The whole piece is good, including this: “Furthermore, in the days before fracking there was a much longer lead time between an increase in oil prices and an increase in spending by oil producers. The result was an unambiguous net negative shock to GDP from a big upward spike in oil prices. The oil price shocks of 1973, 1979, 1980, 1990, and 2007 were all followed by economic recessions.”
Me: Is it possible that energy prices are the important determinant of economic success by various administrations and not their policy choices? Based on the timing of oil shocks listed above, we would expect the economies of Nixon, Carter, early Reagan, Bush I, Bush II, to perform below trend, but late Reagan, Clinton and late Obama to perform above trend…
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