Today, Oil dropped below $90 a barrel. And there are brights spots despite mediocre to concerning economic news this morning and this week.
The price of a gallon of gas has been a choke collar on the growth of the US economy. Bonddad's blog has been writing some of the best stuff on how oil has been at elevated levels of a percentage of GDP that it would have a negative effect on US growth.
The facts are simple for the consumer aspect of GDP and growth in general. The more we as consumers have to spend on fuel, instead of spending and consuming. The restaurant stocks that have blossomed on the rally we had to the high 12000s in the DOW this year consistently state how oil and the price of gasoline directly effect their business. And restaurants are some of the first things consumers with more discretionary income tend to splurge on. So this news of oil dropping could be positive.
Obama's releasing of the petroleum reserve could have helped in the dropping of oil recently, and I don't think you'll find many people who will say it has done the opposite. If there is a sustained low price of oil, gas prices can finally start their downward turn, which can really be as good a stimulus to the economy as anything we could get out of Washington, like Jim Cramer said recently on his TV show.
If folks are able to have more money in their pocket, we might be able to get something going again like we've seen in certain multi-month spurts of growth we've had since 2008. Folks are more likely to spend money when they don't have to spend it on high gas prices. I think there are a few bright spots in this relatively toxic environment around trading in the markets recently. It will be interesting how gas prices react to oil's drop for the second half of the year.