Low Costs At The Pump Could Mean High Costs For Manufacturing

Anyone who drives probably feels a little bit of relief when they go to fill up at the pump and see the price. Americans are paying more than half of what they were just a few years ago, and that is adding up. Last year, drivers saved about $100 billion, leaving them a little extra to spend and save. It sounds like it would be a great thing for the U.S. economy, but the benefits aren’t extending as far as one might expect. When it comes to manufacturing and industry, will low energy costs end up hurting more than they’re helping.

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Cost Of Low Energy Prices

Low energy costs have helped manufacturing in many ways. On the surface, it costs less money to reshore and run a factory, ship goods, and complete a range of other essential operations. However, low energy costs don’t amount to happy news for everyone, especially those in the energy sector. Oil, gas, and other companies are investing and expanding less and downsizing more, which has a big impact on regions that depend greatly on oil and gas production and supply. Subsequently, the demand for durable goods has plunged. Orders for a broad range of manufactured goods, from transportation equipment to non-defense aircraft have dropped. A stronger dollar has also put pressure on factories and may have increasingly subjected the U.S. to the affects of global economic slowdowns resulting from price drops in petroleum, copper, aluminum, and other materials.

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Reasons For Optimism

While this trend has some investors are worried, others see reasons to remain optimistic. Job growth has remained solid and the overall recovery of the U.S. economy has continued, albiet a bit sluggishly for some. Some analysts have also pointed out that higher energy prices would be a greater detriment to the economy than the lower costs are now. The average household reportedly saved $700 as a result of cheaper gas, and consumers may feel more inclined to spend. Will that savings create enough of a ripple effect to give the U.S. economy more of a boost and not too affected by global slumps? We may have to wait and see.


Have low gas prices had a positive or negative impact on your business? Has the money you’ve saved at the pump had any affect on the way you spend? Comment and share your thoughts on this topic.

Article Sources:
http://www.npr.org
http://www.npr.org
http://www.cbsnews.com

Low Costs At The Pump Could Mean High Costs For Manufacturing is courtesy of Magoda | Manufacturing America by ROIGROUP