Is the Rapid Decline in Gas Prices Good or Bad for the Economy?

By now, a declaration that gas prices in Massachusetts dropped 12 cents since last week or even that the average price for gas across the nation is at its lowest since 2009, isn’t likely to get your blood pumping.

Consumers have been watching gas prices steadily drop at pumps across the United States since late July 2014. At first, it was really exciting. And it sometimes still is when you see that rare station with prices below $2, but at this point falling gas prices are far from news.

What is news, at least to some, is that not everyone jumps for joy every time they fill up.

With the consistent grumbling surrounding June’s high gas prices (the national average was $3.68), you’d think everyone, except of course the oil companies would do a happy dance when they pull up to a pump now.

Some financial experts, however, say the plummet in gas prices is a sign of a coming global recession. Others feel that while low gas prices are good for consumers in the moment, the plunge in oil costs will affect them negatively in the long run.

Below, Patch has broken down the good and the bad of low gas prices, according to economic experts. Read all about it, then take our poll: Are rapidly declining gas prices good or bad for the economy?

The Good:

Besides the obvious extra cash in our pockets, financial experts are also excited for when consumers spend that money. More dispensable income means more cash spent at malls, movie theatres and restaurants. This influx of spending holds down inflation and boosts both local economies and the stock market, according to The Wall Street Journal.

In addition to boosting local economies, the drop in gas prices also helps both low-income families and manufacturers, according to Mohamed El-Erian, chief economic adviser at Allianz SE.

“Energy spending constitutes a bigger part of the budget for lower-income families, lower oil prices help counter some forces that have worsened the inequality of income, wealth and opportunities,” El-Erian wrote for Bloomberg.

Dropping prices also help industries not reliant on oil.

Last year was the automobile industry’s best since 2006, according to the National Automobile Dealers Association, with almost 17 million cars and trucks sold.

The Bad:

Another obvious start to this list: oil companies. Anyone who makes their living from the extraction and sale of oil will hurt from the plummet in oil prices. This includes employees who drive equipment to the fields and mom and pop gas stations.

Not so obvious, however, is how the drop in oil prices affects other industries. More than 600 people lost their jobs, and another 142 are in jeopardy, due to a recent shutdown of a steel factory in Ohio, according to The US News & World Report.

“The company has suddenly lost a great deal of business because of the recent downturn in the oil industry,” Tom McDermott, president of United Steelworkers Local 1104, said in a statement.

The United States’s gross domestic product (GDP) will also suffer, since “companies in the energy sector have been doing the heavy lifting of capital investment at a time when other sectors have been much less willing to invest for the future,” Greg McBride, chief financial analyst for Bankrate.com, told The Wall Street Journal.

In the long run, according to Wall Street Journal columnist E.S. Browning, the rapid drop in oil prices will make energy prices high once demand returns. “They [falling prices] reduce the incentive to develop new oil and gas fields and make it less urgent to create alternative energy sources,” he said. “That hurts companies in those areas and, because it makes energy less plentiful, means higher costs and fewer energy alternatives once global demand revives.”