The Good News And Bad on Oil: Good Bad Seen in Oil Shift
The growing possibility of a sharp decline in world oil prices helped send the stock market skidding to its worst loss in three months yesterday and fueled a growing debate among economists about whether the United States would emerge a winnerÛÓor once again a loserÛÓ from a shift in the fortunes of the Organization of Petroleum Exporting Countries (OPEC).</br></br>A variety of economists interviewed yesterday said a gradual decline in the nominal price of oil on balance would be good for the country. But most thought a sharp drop in petroleum prices could cause serious problems for a number of important sectors of the American economy, including the oil, banking, coal, natural gas and synthetic fuels industries.</br></br>ÛÏIn the long term, lower oil prices would mean greater economic growth for the American economy,Û said Eric Zausner, who heads the energy division of the consulting firm Booz-Allen & Hamilton. ÛÏBut in the short term, most of the effects would be negative.</br></br>ÛÏThe irony is that when oil ; soared to $34 per barrel, peo- ,* pie said how bad it was for ' the U.S. economy. And now that it may go back to $25, people are saying how bad it would be for the American Û¢ economy. Well in both cases, they were right, because any ' sudden change causes short-, term economic dislocations.Û- benefiting at least modestly from a continued fall in the price of gasoline and home heating oil, which would leave them with money to spend on other things.</br></br>ÛÏMy feeling is the sharp increase we had in energy prices really acted as a tax on American business and consumers, and a decrease would act as a tax deduction,Û said John C. Sawhill, a former federal energy administrator and now senior partner with the consulting firm of McKin-sey & Co. ÛÏI believe it would be very stimulative to the economy.Û