IN 2014 oil prices crashed. Americans jumped for joy. Small wonder: each year the average American consumes more energy than a Briton and a Japanese person put together. The oil-price drop pleased economists, too. Many were sure that it would give the economy a nice boost. However, the oil bust was followed not by a boom but a slowdown (see chart). Figures released on April 29th showed that growth in the first quarter of this year was just 0.2%. All this leads wonks to wonder: are lower oil prices such a good thing?
Gross domestic product (GDP), the total annual output of an economy, is made up of four things: government spending, net exports, consumer spending and investment. The oil price does not much affect government spending, but has a big impact on the other three.
Net exports (ie, exports minus imports) have certainly been boosted by the lower oil price. America exports very little oil, but imports a lot: about 9m barrels a day. With the oil price roughly $60 below its peak, Americans now send $500m less abroad every day—or about $200 billion a year.
Add to this the lower price of domestically produced...
from The Economist: United States http://ift.tt/1Alvale
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