Price of Energy Dropping: Who Does it Help?

The volatile oil prices are flowing in a good direction for our economy right now, but let's not get too giddy!  Oil shocks will come again it is just a matter of time.  In 1973 the price of oil shot up with the Yom Kippur War in the Middle East.  In 1978 the Iranian Revolution, and in 1980 Iraq's invasion of Iran pushed prices higher.  In 1990 it was the invasion of Kuwait. In 2008 it was the world demand with China leading the way to spark speculation that there was going to be an oil shortage, which never really developed but did lead to a large spike in the cost of energy.

Currently, oil prices are being effected by several factors including fracking within the U.S. and downturn in world-wide oil demand.  With the falling cost of oil and energy in general, what will be the major consequences?  As with all changes in economics there will be winners and losers.  Some industries such as energy exploration, drilling, and well maintenance companies will feel the pinch of lower oil prices immediately.  Other market sectors, especially airlines, farmers, manufactures, and retail will be seeing a marked increase in profitability.  As the cost of goods sold goes down both profit and the ability to sell for less will go up.  The U.S. economy as a whole will rise with the drop in oil.  As most of us see our personal energy costs go down, our discretionary income will go up.  It's almost like getting a well deserved tax decrease! The transportation sector will see increases in volume since sales will rise. Unfortunately, unlike the airlines, trucking companies for the most part will not see the spike in profits from lower fuel costs, since most in trucking are blocked out of the fuel volatility due to the freight fuel surcharge programs that are in place.

In the U.S. we are in a consumer economy.  Already our stake in the world economy is rising in comparison to the rest of the world because of the drop in oil prices.  Our party hats are on and our noise makers are in full swing not because of government intervention, but because currently the world market is smiling on us.  While the party is just beginning and we hope it will last a long time, let us keep in mind that just as the price of oil has dropped so too will it rise.  Yet for the time being, let us all celebrate 2015 for the improved economy we will see!