Oil plunge could help consumers; Trump tweets ‘Enjoy!’

FRANKFURT, Germany (AP) — Holiday shoppers should enjoy more spending power thanks to the recent sharp drop in oil prices, though cheaper energy could also weigh on the U.S. economy by dampening investment in shale oil production.

While the fall in oil prices doesn’t yet match the 2014-2016 slump to $26 per barrel, the current decline should soon make itself felt through the global economy.

The international crude benchmark, Brent, has fallen under $65 per barrel from a four-year high in early October over $86, and U.S. crude has dropped below $55 a barrel.

Retailers in the U.S., who depend on heavy Christmas spending, should see a boost as lower gasoline prices give consumers more spare cash to spend on gifts.

The average price of a gallon of regular gasoline in the U.S. has fallen to $2.60 from $2.85 a month ago. So the driver of a midsize car or crossover is saving about $4 on a fill-up while drivers of bigger SUVs could save $7 to $8.

U.S. President Donald Trump took the opportunity to tweet: “Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!”

The drop in prices, however, could also lead to less investment in new rigs in oil-producing U.S. states, offsetting the overall impact on economic growth.

“Lower oil prices are now a net drag on the U.S. economy. This is a huge break from the past,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. Shepherdson said the oil price drop would soften growth “at the margins” as the U.S. slows once the boost from recent tax cuts fades.

The economic impact is also different this time for Russia, which fell into recession after the last oil slump. Analysts say the country, a major oil and gas producer, is more insulated from a market drop because it has found ways to balance the state budget at lower oil prices. That’s one reason Russia has been pumping oil at top speed recently.

The International Energy Agency says abundant global oil supplies should be welcomed as insurance against market volatility. It says lower prices are also a big break for people in developing countries who have seen fuel prices rise due to a stronger U.S. dollar, the currency oil is denominated in.

The recent drop in oil has been driven by calls for major producers to increase production. The U.S., Saudi Arabia, and Russia have all stepped up output.