Oklahoma City drivers may have been rubbing their eyes in disbelief when they went to the pump last week. Gas was $1.99 per gallon, a record low for the past four years. Gas prices have dropped nationwide, even though the Bay Area is still one of the highest-priced regions at $3 per gallon. What are the pros and cons of the decline?

Severin Borenstein, professor and research associate of The Energy Institute at UC Berkeley's Haas School of Business
Gregg Laskoski, senior petroleum analyst at

  • GiorgioOrwell2nd

    The “cons” of this are that this is very quickly in the process of killing the so called “miracle” US Shale Oil Industry. There goes the so called 100 year supply of oil that Obama loves to tout, which is total nonsense of course. It’s much harder to lie about this industry to the US public at these prices. The economics of Shale and Fracking are incredibly fragile. According to Bloomberg news, at these price levels only 4 of the 18 Shale producing regions in the US are profitable.

    The fact that most of the drillers are small companies financed by fickle junk bond investors means that this industry is shutting down in the $60 a barrel prices.

    The OPEC countries have massive infrastructure pumping the most demanded high quality light crude oil that needs very little refining, at a much much cheaper rate than Shale. Shale only ever made sense in the $100 a barrel range, and even then was more of a speculative land trade than an actually profitable industry.

    Sure prices will probably jump back up again as OPEC doesn’t have a unlimited supply, this is known as the “Bumpy Plateau” of oil prices, there are not smooth movements when oil is running out, and it will be much harder to find investors for Shale the next time around.

    This is a classic example of the old maxim, “when the tide goes out you can tell who’s been skinny dipping”. The entire US economy has been skinny dipping for quite some time.

  • Chris OConnell

    Good side: it’s great for the common person who benefits more than the rich since gas costs are a much bigger percentage of the budget.

    Bad side: more consumption, more driving, more CO2, more inevitable global warming.

  • Chris OConnell

    I tend not to have enough confidence in the powers that be to believe in conspiracy theories, but considering the countries hit hardest by low oil prices (Venezuela, Iran, Russia), I suspect that there must be very many people in the world who believe this is orchestrated by the US to harm those countries.

    • ES Trader

      If it is then good for us to hit Putin and Aytollah where it hurts and send Russia into a recession

  • ES Trader

    lower oil = good for consumer: NOT for environment and enviromental movement and Prius salesman. For Tesla buyers not as much as they are not simply motivated by price of gas.

    • utera

      Its entirely irrelevant to the environment, a swing of a few cents when gas is still over 3 dollars a gallon is nothing. Peoples transportation needs are inelastic, and people aren’t going to drive further just because gas is a tiny bit cheaper, the cost of driving a car goes beyond gas but to wear and tear on your car. Fewer young people can afford a car to begin with. Gas is nothing compared to all the insurance and other costs of owning a car. And fundamentally this is all absurd because the more well off people wipe out any of their supposed green savings the second they go on a far off vacation, while the poor guy in his truck but never flies anywhere really comes out ahead in the end in terms of emissions.

      • ES Trader

        consumers always feel better when a product they purchase suddenly costs less, it’s human nature.

        When one fills up and the out of pocket cost goes from the $40’s to the high 30’s and down to the low 30’s thats $15 – $20 for a bottle of better wine, a couple movie tix, or even help get a new $100 tie that only takes $80 out of the clothing budget !

        That is why jars of peanut butter stays the same price with the dimple on the bottom grows deeper netting less in content but the price is the key. P & G knows this as well as any world class marketer.

        Prius sales fall when gas prices fall; SUV sales rise, that is a fact.

  • ES Trader

    As for Chevron & Exxon/Mobile stock prices, they won’t fall much more as the dividend yield is 4.11, 3.13 respectively and going higher with each price fall thus attracting income investors that drool over a 4 % dividend that is secure and likely dividend increases in the future

  • City Resident

    Now is the time to raise the gas tax and peg it to inflation. The gas tax no longer is able to pay for roads and highways and must be raised to cover the cost of maintaining infrastructure. Furthermore, future infrastructure projects need funding (ie. BART extensions, a new transbay tube, etc.) and the gas tax (and vehicle miles tax) are environmentally sound ways to help pay for this.

  • utera

    Was disturbing to listen to the guy with the “Volt” talk about how he dreams for 10 dollar gas. Could he be any less empathetic. The middle class is already under strain and he wants to kick them in the teeth, this is where the left is just as bad as the right, the level of smug disregard of his lessers was just disgusting to hear.
    And its ridiculous that when finally some pressure is taken off working people on the regressive costs of energy when the cost of everything else has been rising for years, you hear all these people on the left quickly try to rush in and nullify these small gains, how petty can you people be.

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