Sample Economics Article Review on Gas Pricing in the U.S

Gas Pricing in the U.S

The article describes the trend observed in the current decreasing prices of the gas in the US as a result of the declining prices of oil globally. The article has analyzed the economic impacts as a result of low oil prices. According to the article, economic recession, and unemployment is a threat to the US, taking into consideration a large number of employees that are working in the oil industry.  The paper would evaluate the impact of low gas prices on the US economy concerning unemployment levels, investors’ confidence, and the effects of market forces of demand and supply in controlling the price levels of gas.

Evaluation of Article

There are many positives economic impacts as a result of oil prices. The costs of industries that use the petroleum product as input would benefit from low production costs. This will cause the consumers to buy products at low prices increasing the disposable incomes and savings. There has also been an increased supply of oil in the US that would probably over surge the demand, causing the prices to be lower (Ewing, & Thompson, 2007).

The recent low prices have been reflected in the US stock markets since there has been a positive correlation between the oil prices and the US stocks prices. The effects have hence been intense to oil stock and bonds investors. Companies in oil industries lower their investments in capital projects, face challenges in servicing the debts, and their credit rating negatively affects the creditors and banks through non-repayments of loans. The lower prices levels also result in low tax revenue to the government (Ewing, & Thompson, 2007).

Recommendation

The author considers that the short-term impacts of lower oil prices are negative since many jobs are lost in oil fields. The article also explains that even if consumer and business spending will be impacted positively by low prices, it would take time because people do not believe low oil prices are manageable in the long run.

My point of view is that the US economy would benefit from lower oil prices due to increased disposable income and decrease in firms’ overhead for energy. Increased demand resulting from lower prices would stimulate economic activities (Ewing, & Thompson, 2007. The only states impacted negatively would be the states whose economies are driven by gas and oil, but the net effects will be positive for the whole nation.

 

References

Ewing, B. T., & Thompson, M. A. (2007). Dynamic cyclical comovements of oil prices with industrial production, consumer prices, unemployment, and stock prices. Energy Policy, 35(11), 5535-5540.