Oil is below $60 a barrel, representing an almost 60% drop from its high in low $140s less than four months ago.
This $2-plus a gallon reduction represents a $120-plus a month cost savings for someone who drives 1,500 miles a month in a 25 mpg vehicle (60 gallons a month x $2). You have to back into the number from this story, but assuming additional cutbacks in driving since April, Americans drive about 75 billion miles a month. If drivers average 25 mpg, that means consumers are saving over $6 billion a month (3 billion gallons times $2), or over $72 billion a year if prices stay at or slightly above where they are.
The stats just presented appear to be for just cars and SUVs, and to not include commercial trucks and other diesel vehicles. Diesel fuel costs are down by about 40% from their peak. The savings in this area probably push the total annual fuel-price reduction economic stimulus to $100 billion or more, which is more than the $94 billion in stimulus payments the IRS distributed earlier this year.
That should be plenty of stimulus for an economic recovery — if incoming president-elect Obama would just:
- Promise to postpone for several years, or better yet permanently shelf, any and all impending automatic and planned tax increases.
- To keep prices down and to ensure future supplies (i.e., to make the fuel-price reduction stimulus permanent), resist the urge to restore the bans on Outer Continental Shelf and Alaskan offshore drilling lifted by Congress and President Bush, respectively. Let ‘em drill.
- Abandon cockeyed plans for “windfall” profits taxes on oil companies.
If Obama doesn’t currently signal and then carry through on forgetting about his punitive tax plans and/or foolishly locks up fuel resources, the fuel-price stimulus just noted will go away. Any other so-called stimulus coming out of Washington won’t be of much ongoing value to the long-term health of the overall economy. If fuel prices will head back up, or if Obama’s campaign tax promises are carried out, businessmen and entrepreneurs will continue to play it close to the vest by avoiding hiring and capital investment.
The new president and his party have worked tirelessly to talk down, and take down, the economy for years. They finally succeeded doing so sometime in June, creating the current POR (Pelosi-Obama-Reid) Economy — soon to be known, barring an unlikely fourth quarter turnaround, as the Pelosi-Obama-Reid Recession. Unlike them, I want the US to prosper no matter who’s in charge. Following the suggestions just outlined will bring prosperity back.