$40 Oil Price and its Impact on U.S Economy

September 5
3:41 AM 2015

Commodities such as oil is slowly declining following the Black Monday selling pressure on 24th August raising concern among investors regarding current world economics. China stock took a plunge and Dow Jones Industrial average hit its lowest value for 2015 on that day.

The low oil price has both negative and positive impact on the U.S. economy. The main effect of low oil price is unemployment especially in the energy sector.

According to The Texas Tribune, Texas saw the state's worst employment problem this year when they recorded a loss of 340, 000 jobs in this year alone. The report is confirmed by the Energy Information Administration as their report shows that the United States had loss a total of 6.5 percent job this year from the petroleum industry alone.

This is a significant figure since all major oil exporters' countries recorded a total loss of $1 trillion in the sale this year according to The New York Times.

However, cheaper oil price led to an increase in the industrial metal price. This is great since the industrial metal is the main economic indicator and it is abundance in the United States.

The falling oil price will also increase consumer spending power as the consumer will have extra cash to spend now compared to when the price is at $150 per barrel. The action will also help to boost U.S GDP.

According to Bloomberg, U.S. GDP is expected to increase by 0.2 percent by 2015 year end. The International Monetary Fund also provide an optimistic prediction as they are predicting the global GDP to increase by 0.5-1% where U.S will see their GDP increase between 1-1.2 percent for 2016.

Another great impact of lower oil price is the possibility of having the inflation in U.S completely wiped out by year end. This will cause the price of goods and services to decrease as the manufacturer could reduce their cost of production. A situation preferred by the consumer.

According to The Texas Tribune, crude oil price hits the lowest price since 2009 when it is selling at almost $40 per barrel last week after a strong price increase from last year fall. The price is slowly falling after it hits the all-time high price of nearly $150 per barrel in 2008.

Some economists also agreed that the consumer should not be worried regarding U.S economic situation since oil price did not give huge impact on U.S Export and Global Growth as the growth is measured by lots of other indicators and not oil price alone.

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