The first sign of spring seems to be rising gasolineOpens a New Window. prices at the pump and this year is no different. Gasoline pricesOpens a New Window. have been on the rise for the last six weeks and while we all like to grumble about it, it might not be all bad news.
You see, rising gas and energy prices really are a sign the economy is doing great. In fact, according to many economists and the White House Council of Economic Advisers, the higher energy prices that are driving up your bill at the pump could actually be a net positive for the U.S. economy.
Back when the U.S. was totally dependent on energy imports to make ends meet, rising energy prices could stop the U.S. economy cold. Not only would it take money out of consumers’ pockets, it put U.S. businesses at a disadvantage and in many cases forced them to raise their prices and cause inflation. (Not to mention the fact that billions of dollars of U.S. cash would go overseas to the many oil producing countries that did not like us very much. It made them richer and the U.S. poorer.)
But the times have changed. Last year the U.S., for the first time since 1973, became the world’s largest producer of crude oil. That fact should change the belief that low energy prices are always good.
Solid energy prices now have benefits for the entire country, not only in the energy industry, but for many U.S. businesses across the board. Domestic production helps boost overall economic growth. Stronger growth means that U.S consumers, in most cases, are less impacted by rising energy costs.
The boost that the energy sector has given to economic growth has kept prices relatively low while global demand is high. This had led to business expansion, reduced unemployment and rising wages. This combination means that U.S. energy expenditures, when adjusted for inflation, are the cheapest they have been for the U.S. consumer since the 1970s. Not a bad deal, even though it might not feel that way when you pull up at the pump.
The shale revolution has led us to a point where homegrown production of fossil fuels now covers 80 percent of the nation’s energy needs. That has given many U.S. manufacturers a big advantage and has allowed them to expand and flourish with a reliable supply of energy. It has allowed these manufacturers to create more jobs with higher wages. Next year, it will even get better as the U.S. is projected to be a net energy exporter.
That new moniker will lower the U.S. trade deficit and bring more jobs back to the United States. With the addition of alternative green fuels, we should achieve official energy independence. This also makes the U.S. more secure from a national security standpoint, as we will not be vulnerable to international disruptions of supply, both intentional and unintentional.