Energy and the New Normal in the U.S. ... Higher Economic Growth, More Jobs, Low Inflation and Low Interest Rates Lie Ahead While Ebola Concern Grows

High inflation has been a continuing problem since the 1970's explosion in oil prices.


But now that the U.S. has become the biggest source of liquid oils in the world, thanks to the our domestic fracking revolution, the cost of energy is falling rapidly. Yesterday the price of oil fell by more than 4+% and it's falling another 1+% early this morning.


Global Oil Glut Sends Prices Plunging has the good news story for U.S. consumers:


"Every one-cent drop in gas prices means a $1 billion annual decline in energy spending by Americans, estimates Brett Ryan, U.S. economist at Deutsche Bank.

“It’s like a tax cut that consumers can use to eat out more often, buy more goods or help save for a new home,” he said.

The savings isn’t “a huge boost to GDP, but it’s a positive for U.S. corporates and makers of goods and services,” Mr. Ryan added. Tom Kloza, chief oil analyst for Gasbuddy.com, said the typical American family is saving about $50 a month based on the decline since June.

Brent, the global oil benchmark, fell 4.3% to $85.04 a barrel on Tuesday, a nearly four-year low. It was Brent’s largest one-day percentage drop since September 2011."

Discussion

The Good News -- While it would be better for our domestic economy if everybody in the world benefited from lower energy prices, that's simply not going to be the case. That said, the U.S. is a certain winner relative to the other large energy producing countries as we have a very diversified economy. So while low energy pricing is AN important ingredient of a strong U.S. economy, it's definitely not THE only one.


Our overall U.S. economy, many domestic based companies and all U.S. consumers will definitely be winners as low oil prices result in low prices at the pump, low interest rates, low inflation, reduced import prices and a consistently stronger U.S. dollar. Our national security will benefit as well.

On the flip side, exports will be impacted negatively as energy dependent countries struggle with the effect of low oil prices worldwide. Especially impacted will those 'one trick energy dependent ponies' like Russia, Venezuela, Iran, Saudi Arabia and other OPEC nations that depend on high oil prices to fund their economies and national budgets.

For our part, import prices will be lower due to the stronger dollar, but our exports will be reduced for the same reason.

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Quarterly earnings reports have begun for U.S. companies, and companies like Intel, JP Morgan, Wells Fargo and Johnson & Johnson all reported good results yesterday. These reports signal that better days lie ahead for our U.S. economy.

The bottom line is a virtuous circle --- consumers will spend some of their oil related savings and pay off some of their debt as well. As a result companies will hire more employees as the economy strengthens further.

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The Bad News --- The developing Ebola story is set forth in Second Health-Care Worker at Texas Hospital Tests Positive for Ebola Virus:

A sign points to the entrance to the emergency room at Texas Health Presbyterian Hospital Dallas            

"A second health-care worker at a Texas hospital who provided treatment for the first person diagnosed with Ebola in the U.S. has tested positive for the virus, state officials said Wednesday.

The worker “reported a fever Tuesday and was immediately isolated at the hospital,” the Texas Department of State Health Services said in a statement.

The person was among those who treated Thomas Eric Duncan, a Liberian man who was diagnosed with Ebola at Texas Health Presbyterian Hospital Dallas on Sept. 30, and died last Wednesday.

Another nurse who treated Mr. Duncan, Nina Pham, 26 years old, was also infected while caring for Mr. Duncan and is now being treated at the hospital, which said yesterday she was in good condition. Health officials and the hospital haven’t determined how she became infected, and have said she was wearing a mask, gown, shield and gloves when treating Mr. Duncan.

The U.S. Centers for Disease Control and Prevention said Tuesday that it was actively monitoring 76 health-care workers who helped treat Mr. Duncan for potential Ebola exposure after Ms. Pham had contract the virus from Mr. Duncan, though CDC director Tom Frieden said there was no reason to think any of them were infected.

The 76 workers are in addition to 48 people who were already being monitored because they were in contact with Mr. Duncan, or with people who themselves had been in close contact with the Liberian man before he was admitted to the hospital Sept. 28.

Texas said Wednesday morning that health officials have interviewed the latest patient to develop Ebola, whose name wasn’t disclosed, to identify any additional “contacts or potential exposures, and those people will be monitored.”.

While preliminary tests in Texas found that the second worker had Ebola, testing on a separate specimen from the patient will be conducted by the CDC in Atlanta to confirm the person has the virus, the state said."

Summing Up

It's sad to say, but I believe the Ebola situation will be brought under control quicker now as the tragic events of the Dallas hospital story unfold. Government can't ignore the potentially devastating effects of this deadly disease any longer.

Meanwhile, the U.S. economy, will grow stronger and remain relatively strong for years as the 'new normal' of low energy prices, low inflation, low interest rates, more jobs, lower budget deficits and lower cost imports take center stage.

The stock market will remain volatile but over time share prices will grow to record levels as our economic situation continues to improve, which it will.

That's my take.

Thanks. Bob.