Will gas prices save the economy?

[jinxmchue]

This question hit me the other day. Gas has dropped significantly these past couple weeks. People are obviously enjoying the drop and probably are starting to buy more. (It'd be nice if I knew where to find statistics on that.) I know that filling my tank for under $40 was a really pleasant experience and encourages me to not be so frugal with my gas usage. If that attitude is shared nationwide, could this help rescue the economy?

[LogansPapa]

Gas could be a dollar a gallon and it wouldn't save the economy.

[lacarnut]

This question hit me the other day. Gas has dropped significantly these past couple weeks. People are obviously enjoying the drop and probably are starting to buy more. (It'd be nice if I knew where to find statistics on that.) I know that filling my tank for under $40 was a really pleasant experience and encourages me to not be so frugal with my gas usage. If that attitude is shared nationwide, could this help rescue the economy?

I doubt it; people have short memories and many will go back to their old habits of driving more. I filled up with prem. today at $3.25 for Chevron.

Lower gas prices are a two edged sword; good for the consumer and the economy. On the other hand, oil giants like Exxon and independents like Petrohawk have cut back on their budgets for new drilling by a considerable margin. Pricing for gasoline may stabilize at this lower rate but prices will go back up when demand outstrips supply.

[hampshirebrit]

I doubt it; people have short memories and many will go back to their old habits of driving more. I filled up with prem. today at $3.25 for Chevron.

Lower gas prices are a two edged sword; good for the consumer and the economy. On the other hand, oil giants like Exxon and independents like Petrohawk have cut back on their budgets for new drilling by a considerable margin. Pricing for gasoline may stabilize at this lower rate but prices will go back up when demand outstrips supply.

Exactly right (the bolded part especially).

A higher oil price sustains exploration efforts and makes exploitation and development of existing known reserves more worthwhile.

And a rock bottom price will stifle development of marginals like shale and tar sands completely, since even the current price (around £70/bbl) makes them less profitable.