Lower oil prices put downward pressure on interest rates and air fares, just to name the obvious. But it also puts pressure on the price of all petroleum based products. So close your eyes and imagine all those rows at Toy'sRUs, Target, WalMart, and Best Buy. Plastic, miles and miles of petrochemical based plastic. Add some more savings for home heating and cooling bills, lower shipping costs for imports, and you start to get some impressive numbers.
Oil is too cheap.
You can get some idea of how cheap it is by taking a look at the exchange rate between oil and stock prices and how it has fluctuated since 1970. Measured against common stock prices, oil has lost 94 percent of its value since 1980. More important, while consumer prices have risen 433 percent since 1970, oil prices have only risen only 351 percent. In other words, while energy prices appeared to be a source of inflation in the seventies and early eighties, they are now a moderating force. We can't blame OPEC for inflation anymore.