This time, it’s different. Fracking is immensely capital intensive. Wall Street is up to its ears in it. Hedge funds and private equity firms will join banks in taking the hits on their equity stakes and on the debt they hold.
But forget that. What we’re inundated with is the tsunami of benefits of lower oil prices. Airlines make extra billions by offering the same crummy service without lowering airfares, though their fuel costs drop. Utilities come out ahead for similar reasons. Toll road operators will be able to raise tolls and extract more money from drivers who’re sitting on what they’ve saved at the pump, according to Wells Fargo. It expects airports to shine, “specifically large international gateway airports with significant cargo operations.” Because consumers will buy more imported stuff with money they saved on gasoline. Alas, much of that gasoline is an entirely American-made product all along the chain, from the technology required to extract crude to the gallon of regular dispensed by a machine.
Whatever money consumers save on gas lowers the consumer-spending component of GDP. If consumers spend all this money on something else, consumer spending stays flat. It just gets shifted around. But many people won’t spend the money on other things. That this equation doesn’t compute, though consumers like it, is clear [This Is Why the Oil-Price Crash Will Maul the US Economy].
And it’s starting to show up in the corporate numbers.
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