Cheap Gas Prices: The Good And The Bad

Gas prices are still cheap. They'll stay that way as long as oil prices are low. Recently, crude oil prices have gone up from the $45-range to about $55 (which is still low. I would argue a price at around $80 is good for everyone, but that's for another blog).

Why are cheap gas prices good?

That's an easy one. Everyone who buys gas for their cars already knows why cheap gas is good. It means immediate extra cash in your pocket. Instead of paying $50-$60 to fill up, you're paying $25-$35. That's big savings! 

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Those savings are not only felt by you. They're felt by large companies like Walmart or Target. Companies that spend millions to have their products transported to the thousands of stores they have across the country. Those savings, in turn, are passed on to you. The same thing goes for grocery stores. Cheaper gas means cheaper baked goods at the local Kroger. The list goes on.

What can possibly be bad?

For one, layoffs in the oil industry. These are just three examples of that happening today: 

• More Oil Industry Layoffs In Oklahoma
• Three More Energy Companies In Texas Warn of Layoffs
• BP Cuts Jobs In Houston Due To Low Gas Prices

If enough people are fired, it could create a recession in Texas. Not good. Especially if you live in Texas.

Many airlines won't be dropping ticket prices. I called this late last year in one of my blogs:

If they are consistently over 80% capacity on domestic flights (with that number likely to rise), why would they lower their prices if they can lock in more profits. I mean, even when it seems airlines are nickel and diming us out of the nose - guess what? We're still buying up tickets! Business is good. If I were a CEO I wouldn't lower ticket prices. I don't need to. 

Recently, the CEO of Delta said they won't be lowering ticket prices. Instead, they'll be paying down debt. Guess what? You won't find lower ticket prices at American either. This coming straight from the company's CEO on a conference call with reporters. They'll put that money toward giving the customer a better experience. 

Skift is quoting Doug Parker (American's CEO) as saying, "When demand drops you will see pricing move accordingly." 

What's the takeaway here? 

That one's simple. Read my blog and you'll know what'll happen next month :)