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The Think Tank 1210pm, Dropping Gas Prices

Jan 25, 2016|

Should we be celebrating cheap gas at the pump or worrying in fear? A growing number of economists say “try cringing”. This hours guest: Christian Weller - Senior Fellow @ Center for American Progress (Expertise: Private pensions, Social Security, U.S. economy and the labor market, the Federal Reserve, international finance, consumer credit and finance) Mark Perry - American Enterprise Institute Scholar (Research areas: Financial markets, U.S. and International economics)

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Automatically Generated Transcript (may not be 100% accurate)

Listing drew could tell me jokers morning show goes away as we come and work. Discussion. About whether we should be concerned about people at the poem celebrating the peak concern. And initially bring that book ports or Britney and we're been page from Brooklyn put enough pockets than more one government pianist said. The one thing that the last few juniors are probably. Read up on the subject get some gifts that know what they're talking about. And you'll learn this accord that simple and sure enough club to pulled up to uncle here in greed index which I did not know that once one. And the headline was why you should worry. About she boil with the number reason to walk I the hit Wall Street Journal and they had lone wolves are we headed for recession. The worst to weed stored on record in the market if the bears wide prompted economic growth in general or won't be week. This year. And the second Lipton I've learned in the last ten years. Headlines. Are written in order to get to stop and read and take a look at whoever. Is paying for that matter so bored when do we go to conservative. Liberal doctrine would experts. In these fields and try to get both sides of the concern we're trying to get educated in that thing I. Report we've Christian Weller senior fellows center for American congress lectured to prod to pinch and some obscurity grows column. Labor market Federal Reserve in an entrepreneur and consumer credit Auburn on and on. This well or bad thing pure road competent to talk to us about those. I hope so. Who could do and I've appreciated calling well thank you. So bigs and questioned should we worry about cheap oil and should we sell 100 somewhere in between. I think somewhere in between I think when you look at the last 56 years of US economy. We came out of the great receptions but the worst recessions were two. In the middle 2009. So word and so in the seventh year this. And so. When it can write you with the economy for effort the last few years it. Sort of stable but not tactically spectacular economic growth that for a pretty content you'll all the rules of for the labor market. He and it is these that mean I think we have to understand is that why they'll. That certainly has led to ignore economic insecurity. But the poverty lots of economic struggles and people really sort of evenings slowly to become out of the hole. In the last year. The economy over the past 67 years has with stood. Tremendous a mix of hip when it's on the come from. A strong dollar war. Crises in Greece and Russia and China and everywhere though the word volatility of oil market itself. BD US economy have been privately resilient arm has with the a lot of these these. Hit with Ian. The oil market is sort of another one in. It was so let let's talk about what price in particular. It's not it it has a good news and bad news eight in two. The good news is. Before prices means let spending pomp let spending for heating oil which particular port for north of referred. New England were rightly have. Going that means more money in people's pocket in that means we're spending and we. Scenes of a pick epic consumers in six months as oil prices that going now. That's the good the bad news and you've probably noticed in the gulf area the bad news is. Lower oil prices mean lower oil production on mute laid off in the oil field. It's actually impacts the Bible so it in the Dakota and what it'll mean. In it means to topple the and that means lower growth in the states that have carried a lot of economic growth over the last few years until we're in the week. Pattern to eat. Which one of factors that good news the bad news part is is that winning out. Apart it is it's not just in the US. Moral crisis a war to drag down on these economies and countries that are heavily dependent way exports. The Venezuela Brazil Russia Indonesia and others. Ian we export to those countries and if they're going into recession or slowing down. Our experts are being hurt being and we have. Seen. A slow down next to but. Those that it was off that again from. Good news the US economy and US exporters have done tremendously well eat them. Went to the deck deck stacked against them 56 years with a very strong dollar in slowing down demand overseas. So. On the way I see this is the US economy while I'm Visteon people struggling once they beat or rate of the economy. That. To be surprisingly strong in the last 56 years to whether bowl these potential bad news in in for the time being. I mean. Not in the camp that camp that Brooke falling into recession we expect. The economy will continue to grow slowly it will continue to actor opposite of moderate peace the unemployment rate will continue to grow again. Wages and start picking up from an even more spending from consumers. On cars and refrigerators and Holmes and I think now also hate the police. Also export that would losing forums. All right let me tell Greg you do jurors Jordan to worry am asking the question. Cheap prices you seeing that Paul good about it somewhere between four weeks you. It means big energy problems for the state budget could be gigantic cuts that help. Higher education. Mean if you're jobs in the oil pan on the side and more cheaper to fill of our much cheaper he drove home. More Monday in your pocket butch what do you think we're going. Come on ride back. We've got the Hartford Gibbs sculptures should 0187. A simple blood and kind of strange questioned why should we worry about she boil. Louisiana is pretty self evident Watson drops big big problem state budget not all because Angelo but certainly. A printed in large part of that. In the end and many of the things considerable repression borrower would this year's senior fellow. Cinema for American progress with expertise. In all year you that this questioned car. Christian. What do you think would happen. Here of oil prices they'd be in the lone. Thirty dollars a barrel or wind into the twenty. For an extended period to 234. You're good idea about I'd. Well it's generally a bad idea at. There when it comes to oil prices. One thing we need to understand it is we've gone through massive swing in the world markets over the last ten years in debt. Generally has been. Not part to a new missed the main thing is now where price volatility. Whole pack. A lot of investments well among households in the month for so helpful for an. They don't know equal or oil prices really honesty low I mean at this point the barrel down thirty dollars or less. What we really on the lake that gallon at the pump but the dollar for the dollar we go back before now. He and so would think consumers into when they're holding back from buying callers. Because they don't know really tight fuel efficient one bird and it bodies in suvs that. Doesn't get them in in the team's true. Companies that want to buy trucks in and new callers for their car park. In that it's true for governments were thinking about the bus routes or think about light rail. What kind of what price should be so and so the price swings these massive swings penalized in years. Going from well hundred dollars a barrel down to thirty dollars a barrel. Nuclear detrimental to actually be economies so that the the bad news on the good news site at least for her. More oil prices while Pete for holding off from buying parts of beaten beating big investment the putting their money elsewhere in in the rebalancing as. You'll look at. Consumer spending numbers you look at the rate. People are eating the same percentage after income that they did before the oil prices fell. Which means they're spending money on things other than oil. According and in their homes and they're. Now more than the other thing auditing callers their off hours. So yeah I think. Dirt and and that exactly what we're hoping. That the consumers are gonna become immune to rising actor and a lot of would call pent up demand. Consumers didn't do all that well last few years because income gains which means where there have been now being waged in and seeing extra help the oil partners spending the money on. Big ticket items refrigerators. TV how to how to home renovations furniture that kind of stuff. In and so for them for that time it that's one good. News is that when things really seem. Governments. Both state and or government over the last 56 years have really stepped in and help their citizens in the economy. On the one injection that will be in public yet. Is that Medicaid expansion that will bring in extra dollars and two you know global problem that some of the scene that Louisiana he's from lower oil price. There's good reason. And I have got to be admittedly. Strange question. Hum number of young college students. That's men talked to him a couple of months ago in in the conservation. Question answer period. I said to them hmmm if you're buying new cars because of who's gonna have to assure an auto industry. And nobody's in two and a new through graduate students. And its signal. And they had one of those people there so why you should worry answered why should you buy a car he said look. You you can look it up we did we park our cars. In this country. On an average of 85%. I can call over. And watched the caller calm to me. In on a much cheaper. But nickel per mile to get. Then they mention Chrysler. In Woburn and somebody Yeltsin lip. And Google or all working on new bird type projects. Laws. You've got the future of self driving cars. Which a lot of people say well there are a long way off. The word we're in an expert to intrude technology curve we're going all the hockey stick. And there's a good chance. Over kin had still driving cars within the next five years. That's why am supposed. Ball low prices just never to go back. Well I mean. That they're holding on. It appeared the don't think that the oil prices the real on that they're gonna shoot up very quickly and actually just sought new type of that mountain one major banks is expecting prices to rise by 30% this year. In that little holes people pack. It's that the that the bad news that oil price volatility hold investments back in the economy in in. But it seemed time all the numbers bolt from business and how also pellet that. Companies and many individuals putting the money that the city being in not fine are not filling up the car. At four dollar ago but rather than a dollar figure two hours ago that they're putting the money elsewhere. And in it largely putting it would to what we called durable good idea that is. Furniture that is how that home renovations. If refrigerators. TVs that kind of stuff so whether it's spending it on the part there's been you know worse as some quick. On net the economy is he's doing relatively well because consumer Iraq to putting money back in two on the awards of putting on. Into increasing services which is what we call them experienced. Spending. That is going to be part going indication. In and people sort of feel like a little bit more positive about the economy than they did a few years ago. In the again. At this point the positive news is that one matters like that stuff happening in the economy the US and consumers start to spend money. Which is so long calming Ian is a good thing that the visit happened. And I think that will be enough to with the end of the bad news that big into mobile oil prices. Such as job losses in Louisiana and Texas such as stop law. Christian we couldn't hold a news comes from without huge thank you so much that you're. Good. Every. Breeze on Prague ago oil company. There's cold and nothing. Is in the executive suites and octagon and probably you know. 9919. To nothing 3% of the company's. Or owned. By. Some glee mom pop shareholder. They all the company. So when they sell price a little properties that again. There are also losing money on the other end and when it comes to retirement benefits or if they're retired. There there but the league prop that they get from that stock. So I think it's. Whole lot more complicated. And we're hearing. We're going to the other side of the political front and American Enterprise Institute. Would come back. When elected be low price to do well. Good news I'm sure it is blood. It concern you'd that we haven't raised the camps to acts in those eight cents. Knitted in 1980s. Late 1981. Reason would go to twelve million dollar. And I'm wage would be prepared. Does it concern news that people being laid off losing jobs in the oil industry does it concern it's part of our budget problem wouldn't think. Two's exit row one heats up. Not really sure why I was reading it but I was launching in the morning spirit in green index. And it should play pushing each ringing in the year and it basically sober looking at words too weak short and record. In the stock market and the bears right product that economic growth in general or going to be we. And then a vertical Wall Street Journal. Odland says boy should worry about it she boil. And a puzzlement to a plug I'm pretty certain words of the pro in the year thrilled because of more money market. Not thrilled because I'll or oil industry heard some of these you know budget puts people out of board. But instead of that that looks like court worldwide and through the one thing and but headlines. There are usually put their of the get treated by couch. Political experts to see what the situation two years. Luckily we go to hold a march period American Enterprise Institute scholar Bruce search error as a neutral marked Hewitt's. And international. Components mark. Thank you welcome good to show appreciated the call. Yeah. So should we be worried about she boy. It does really good question and it's very interesting it to some glad your discussing it but of course that's really much of a mixed bag. That the article again and points out there was some downsides too low energy prices including needs. Negative effect it has on jobs in areas like Louisiana Tech citizens. And North Dakota so bad for oil companies profits and a lot of people stock in the oil companies. So it shouldn't expect I think overall energy prices are a positive for the economy and we can just start by looking at the among all the money that has been saved by gas prices falling from about two week two per gallon back in June to now about it dollar 82. That'd on a national average basis. A fault. The dollar per gallon gas prices put about a 134. Billion dollars in the pocket of consumers around. The country if they stayed afloat now for awhile and on a per household basis it's over a thousand dollars per household in in energy savings so. That part is a huge energy simulate pretty content in the form or lower gas prices. Natural gas prices are falling as well that'll help people with their energy bills over the winner in the western minorities. So of course there are downsides but I think overall looking at the positive. I think that they outweighed the negatives in terms of having. This historically are not very very low oil and gas crisis. In a little bit they're pretty direction. Kolodziej from with a prudent over the weekend lives up and books and retired. And he's said thank goodness all prices down or you do well we're going to be using a lot of that in snowstorm. Here's save a lot of money that I'm the general public to cure a bit of retirement portfolio. And you got quite a bit invested in a couple of oil company is an exit but to come back and I said bode for the I'm beating. The the premiums you're being paid and on the stock is waived that. And he said yeah but it go to it'll come it always comes back to two questions. Don't those doubters say Lori in column in this country. Veteran invested in and bought from fuel and acting in every York oil mining company. Those that invested makeup like 9919293%. Of the stock. Don't they get heard quite a bit in do you see any chance it's. And then the relatively. Near futures say five years. We start getting shelled drug ring caller should gee you Newburgh combining. The combination. Of these Wilbert tight lipped side courts. Self driving cars were people just don't purchase cars or gaps. The way they have historically does that make an accident. When I get from the first question of course a lot of people have investments. Retirement money your savings and from fossil fuel companies gullible people word bastard and but the broad index on what the F and 500 index or you can even bat and a total stock market index fund through band darker fidelity. He also you're owning. 500 different companies and even a 10% of those are energy companies. If you still have a diversified portfolio and so retail sectors blooming now because of you know consumer spending more that the scores and that's the balance on the stock decline in energy companies but you know that's what we advise people. Have a well diversified portfolio like the FP 500. So when one industries is declining in profits and share price. Then they're that offset by all of the other companies fail completely different unrelated. Factors and then in terms of your second question about the future. Of self driving cars and so on and that seems Boise is here so much about that that's the direction. People are happening. But now in terms of actual driving the ball might note that the national highway department just two days spoke about the report for November when you look at the amount of drive over the last twelve months they do with twelve month. Kind of moving portal. That consumers have been driving more over the last twelve months to November and any other time. In the history of the country's own terms of the traffic volume. And driving on road in the United States invaded it is partly because gas prices so low. Give all the driving to places that an all time high and so in the future we have looper and lifted. Do people need to own cars and I'm not quite sure what that would mean that the amount of driving traffic volume driving by would go down. The weather would just be people kind of used more efficient sources other forms of transportation and so but that's another really good point does. That's really would feature is that taking chances in that direction. Maryland Dick break drug Craig much bigger Bloomberg come back from Leno on it. Both mergers are good bye and 201581. Oil oil field service companies. Around the country went bankrupt. Number of banks JPMorgan. Wells Fargo. They have some big dollars tied up there is something we do suit when every this occurred exit cyclical. But then. These battery company exited gone bankrupt Reid filed rebuild goes back up again. Coming right back what do you think prices at the pump good news certain pillow that reason for concern. Choosing 0187. Revenge it about a question should we you celebrate low prices at its own war. Should we cringe in fear of looking at mortar verb ports in the year and Bloomberg. Stood prompted sued Chevron ExxonMobil. Go over 50%. All comfortable lives Lance your loan 81 oil oil field services company in bankruptcy. Banks breaching forward losses. Often called lord parity with the American Enterprise Institute to a an expert in US financial markets economics to veterans and these complicated. Issues. So what do you think are the is just cyclical diesel company's open close open close and thank. Want to wait for the losses and and profits. Sure I mean. As a commodity worldwide commodity in the oil was always been kind of a volatile. You know but commodity and so that means that the energy sector is that at a very cyclical but you know we're hearing about why is now like you mentioned. Maybe 2015. But you know that follows seven years of really strong growth and profits in the oil and energy sector. Seoul. That's what we expected that there's some ups and down Townsend and energy and they you know that's based on commodities like. Like oil so we put it in context that we did not want does that weigh options. And dropped in on earnings that follows seven years of energy boom that we've never seen in this country at all often referred to it. Shale revolution has the most remarkable energy success story in US history Seoul. Now there's a correction going on but I think and that might happen might you know continue for a year or two but. Looking forward the year's out I think we're gonna be rebound in oil prices will stabilize and eventually walked back up to route fifty dollars a barrel probably soul. I think the future looks pretty good long term but would that a couple of years here from turmoil on some. Happiness I get in the oil industry in the stocks and so on. I don't know of you've heard probably got to kind that at least a little weird sued for regions on Louisiana. Who got she intake so you NG facility that have been built I think primarily. Too important to that program. But it turned out they were storing because there was no market for a burden at all. They're preparing to export in changing over. The infrastructure. To do that all the going to be able to import under these conditions. I think Gail what's happening now that would produce and so much shale gas and natural gas. And those prices have come down quite a bit. But I think what's gonna happen is that the rest of the world as much higher prices and they have less availability so. Our abundance the sales gap I think it's now going to be used for export market and you'll around the world in Asia Europe and South America their prices are usually. Two to three times the price in the US now that prices are so low so Greece's huge profit opportunity. To take our bonds relatively cheap natural gas and exported over. Europe and Asia and South America so I think that could be pebble part of that success story that continues for the US energy sector is that the natural gas. Part suppliers will be able to produce GAAP and export it for an international market. And that'll help keep the energy industry here profitable. And afloat. Mark always you better wanna talk to you think you dimmed for the dollar and they have big Greek week. Aren't very American enterprise in twos through scholar. Expert cutter and all of feels financial markets Cuba in an actual economic were common right back stay what is. But via. Wrote a welcome back oh by government troops and immune per screwed today and you're going to be ups and course treat you get injured in the gun zone. She the bright is through business or property owner beat closure could not do it yourself. That should be. Interesting joked supposed pregnancy. Or that we have to be there were guns or refute him mister Simpson beat shop owners and his son. Dead after a dispute with customers and bring our reads the news is that dispute over. Bill. I think Bob has a good show coming up stay with this number called two's exit 170. This is a bit ago. Brigades W you know more hope buying three.