As the price of oil reaches a six-and-a-half year low, longtime NPR host Robert Seigel recently raised a pertinent question: “If oil is the lifeblood of the economy, then when, if ever, will the price decline flow down through the economy’s capillaries into stores and supermarkets and household budgets?”
Seigel explores this issue with economic expert Jason Bordoff, director of Columbia University’s Center on Global Energy Policy. Their discussion provides a helpful and candid description of our current energy situation and how the average consumer can benefit from low oil prices:
SIEGEL: Gasoline prices are low, but should we also expect, say, airline tickets to get cheaper because the price of oil is so low?
BORDOFF: Well, airline tickets in particular are notoriously “sticky.” They tend to go up much faster than they come down. Airlines also hedge their prices. They buy fuel in advance at a fixed-price. So the price decline has not been as steep for airlines as it has for consumers at the gasoline pump. But we will see the oil price decline translate into lots of other savings for consumers, not just obviously at the pump, which is the most obvious, but agriculture is quite energy intensive, so we should expect food prices to come down. And, you know, we should remember, for example, in the Northeast, a lot of people still use heating oil to heat their homes in the winter. As we head into the winter months, that’s extra money in their pockets.
SIEGEL: But so much in our country is transported by truck – you mentioned food. I mean, should we expect chickens and the refrigerators that we put the chickens into all be cheaper sometime this year?
BORDOFF: Yeah, as you said, I mean, so much of our economy depends on the price of energy, and as oil and gas prices decline, that’s going to help manufacturing. That’s going to help the petrochemical sector, and all those prices trickle down to consumers. There’s some lag, it takes time, but this will mean lower prices for consumers for all sorts of goods and services. And then most especially just economic stimulus – a tax cut, money in their pockets in terms of reduced spending at the pump.
Lower oil prices not only help large manufacturers, but also enable the average American to save or spend money that would have been swallowed up by routine household expenses. But as Seigel and Bordoff later discuss in the interview, the current decline in oil prices is a consequence of various global causes that could about-face unpredictably.
That’s why pursuing homegrown energy development – like the opportunity off our Atlantic coast – would make life better for every day South Carolinians by keeping gas, food and energy bills low…all while reducing our reliance on unstable sources of foreign energy. If we’re looking for a proven, long-lasting solution for consumers, it’s the one!
Hear the full interview here.