Economist Mike Walden: The Changing Role of Energy in the Economy

energy

Gas prices have been running 20 to 70 cents a gallon higher during the last 6 month than in the previous six months.   Normally higher gas prices would be bad for the economy and would cause the economy to expand at a slower rate.  But if anything, the economy appears to be growing at a faster rate.  What’s changed with gas prices and the health of the economy?

  1. Three words – US oil production
  2. Gas prices rise and fall with oil prices
  3. When oil prices rise, countries that produce a lot of oil benefit
  4. In decades past, when the US was not a major oil producer, higher oil and gas prices meant more money flowing out of the country when we paid more for fuel
  5. But now, the US is on the verge of being the largest oil producer in the world, thanks to the enormous increases in US oil drilling and recovery this decade
  6. Means more of the gains from higher oil and gas prices will stay in the country
  7. So our economy isn’t hurt as much as in the past when oil prices jump
  8. It’s a new energy world