Tag Archives: low oil price

Gas, Still Not as Cheap as It Used to Be

The Price of Gas

Despite a sharp fall in gasoline prices over the past year, a gallon of gas remains more expensive than it was for much of the period between the mid-1980s and early 2000s, after adjusting for inflation.


The decline in gasoline prices over the past four months has been sharp and surprising. But for Americans wondering why their family budgets still feel strained, part of the answer is almost as surprising:

Gas is not actually that cheap, at least not when compared with its level for much of the last 30 years.

At $2.03 a gallon — its current nationwide average — a gallon of gas is still more expensive than nearly anytime in the 1990s, after adjusting for general inflation. Over a 17-year stretch from the start of 1986 to the end of 2002, the real price of gas averaged just $1.87.

That era of cheap gas is easy to forget. Yet it offers a couple of important lessons about two of today’s biggest economic (and political) issues: climate change and the great wage slowdown.

Political leaders — from President Obama and Hillary Clinton to Jeb Bush and Scott Walker — have been signaling in recent weeks that they consider the wage slowdown to be the country’s most pressing issue. And it’s clear that energy plays an important role in it. The beginning of the wage slowdown roughly coincides with the end of the era of cheap gas, which is no coincidence. Energy costs are a major expense for most middle-class and poor families, taking a chunk out of their real (that is, inflation-adjusted) wages.

One of the surest ways to end the great wage slowdown would be for the United States to make sure it’s entering a new era of cheap energy. “It’s the proverbial tax cut,” says Daniel Yergin, vice chairman of the research firm IHS and author of a Pulitzer Prize-winning history of oil. If energy costs remain at current levels, it would put $180 billion into Americans’ pockets this year, according to Moody’s Analytics, equal to 1.2 percent of income and a higher share for lower-income households.

That’s why taking virtually every step to push oil costs even lower — “drill, baby, drill,” as the phrase goes — would make a lot of sense, so long as oil use did not have harmful side effects.

The most obvious way to hold down the price of oil is to increase its supply. The earlier era of cheap gas was made possible by technological advances that allowed for a surge of supply in the 1980s from northern Alaska and Europe’s North Sea. Mexico also became a major producer. The recent drop in oil prices, similarly, stems in part from supply increases in Iraq and Libya. Even more important has been the shale-oil boom (also known as the fracking boom.)

The problem, of course, is that oil use does have side effects. It leads to carbon emissions, which are altering the world’s climate. Last year was probably the planet’s hottest since modern records began in 1880, and the 15 hottest have all occurred since 1998. Oceans are rising, species are at risk and some types of severe storms, including blizzards, seem to be more common.

Read more » Read more » The New York Times
Learn more » http://www.nytimes.com/2015/01/27/upshot/gas-still-not-as-cheap-as-it-used-to-be.html?partner=socialflow&smid=tw-nytimes&_r=0&abt=0002&abg=1

Swiss National Bank will cut interest rate to minus 0.25%

Switzerland’s National Bank (SNB) will bring in a negative interest rate cutting the value of large sums of money left on deposit in the country.

The Bank is imposing a rate of minus 0.25% on “sight deposits” – a form of instant access account – of more than 10m Swiss francs ($9.77m).

It is trying to lower the value of the Swiss franc, which has risen recently.

Russia’s market meltdown and a dramatic plunge in the oil price have led investors to seek “safe havens”.

The announcement sent the franc lower, and in early trading the euro was buying 1.2095 Swiss francs, fewer than the 1.203 it was worth before the news, just within the target.

Switzerland typically sees money flow in during economic uncertainty.

The new rate will be introduced on 22 January and will only affect banks and large companies who use the “sight account” to transfer funds quickly and without restrictions.

A negative rate means depositors pay to lend the bank their money.

Read more » BBC
Learn more » http://www.bbc.com/news/business-30528404