Cheaper Oil Set to Help Georgia’s Economy More than Most

A new report from the energy policy think tank Resources for the Future has good news for Georgians: gas prices haven’t bottomed out yet, and Georgia’s economy is more poised than most to benefit from cheaper oil. The author’s model, based on oil futures, estimates that national gas prices will fall to $2.30 by January and average $2.45/gallon in the new year.

In eight states, the benefits of cheaper oil are outweighed by the negative impact on oil and gas extraction, refining, and petrochemical jobs. Georgia’s economy isn’t reliant on these sectors, though, so our state will instead see an overall economic gain from lower oil prices. In fact, after taking our economy’s composition into account, Georgia is estimated to have the 15th largest economic improvement due to lower oil prices.

State-level estimates from Resources for the Future

Resources for the Future notes that the price decreases from oil’s dramatic fall will provide the average U.S. household the equivalent of an additional $2,790 a year in income. Once this increase is offset by the negative economic impact faced by the oil industry, the average household can still expect the equivalent of an additional $920 per year. Due to the uneven impact across states, this estimate is likely low for Georgians. Additionally, since low-income families spend larger amount of their income on energy, they will see a relatively higher percent increase in income.

Cheap oil isn’t entirely good news – the author notes that sustained lower oil prices will likely lead to more carbon emissions, and states that have seen major shale booms might be in for a rough patch. However, it seems clear that cheaper oil will benefit Georgia’s consumers and economy in 2015, and these sustained cheaper gas prices might be a topic of discussion in the next General Assembly session when determining how to properly fund Georgia’s infrastructure.

21 comments

  1. greencracker says:

    This graphic is skewed because it gives no scale. What’s the range between “top ten” and “hurt?” Could be 1 percent, could be 0.0001 percent.

    The way this is done, it’s drawn to make some point that the creator wants to make, not present data.

  2. Hopefully there weren’t too many people who “learned” something about the Texas/North Dakota governing “miracle” – which was nothing more than happen to have a lot of a natural resource that people all of a sudden want to pay you for.

  3. gcp says:

    Agree Ga. benefits from cheap oil but the downside of cheap oil is way overblown. Texas, for example, has diversified into high tech and got Toyota to relocate from California.

    But don’t expect cheap oil forever. T Boone predicts 90 to 100 crude in a year to 18 months. His prediction is way high but as we move to spring/summer we will see higher prices, so enjoy it now.

    • MattMD says:

      Oh my God, it’s gcp-domas. Really? Gas is going to be higher in the summer?

      Hey, has man landed on the moon yet?

  4. Dave Bearse says:

    I returned late Monday night from a long weekend in far south GA. I passed by three gas stations selling gas at less than $2 per gallon along the way there or back—I’d thought the $2.17 I paid just south of the southern I-475 / I-75 interchange was a steal before I’d passed them.

    A Georgia angle is that state motor fuel tax revenues will follow prices south. (FL is only state comparable to GA with respect to the magnitude of its sales tax on fuel relative to total fuel taxation.)

    It’ll never be any easier than now to increase motor fuel taxes. Any discomfort nation at the Dome about increasing gas taxes, given the circumstances, will reflect the GaGOP establishment’s fear of the TEA party, since most Georgians would be oblivious to increasing gas taxes so long as pump prices don’t increase.

    • Charlie says:

      Actually, we are roughly equal to AL and SC in gas tax right now. We’re a bit more than a dime cheaper than NC and FL.

      First, which state(s) do you think are our competitors….

      But to your point, the gas prices in Atlanta are inflated because the EPA mandates a “designer blend” that changes our supply/demand curve. We pay more because the refineries who make our gas are limited and thus supply is artificially constrained. The GA stations outside Atlanta have a huge advantage on the supply market, and can take advantage of falling prices quicker.

      Your point is valid, but I encourage everyone to understand that there are forces that go into our relative price of gas other than Georgia’s state gas tax rates.

      • MattMD says:

        One thing I have always wondered is why gas is so much higher in Midtown/Buckhead than the Smynings or even the West Midtown Racetrack on Atlanta Road. We are all in the same EPA zone, I think. I paid $2.28 today.

      • Dave Bearse says:

        It wasn’t my intent to make the point that Atlanta gas prices are inflated, but rather that gas prices, as indicated by outstate price changes that lead metro Atlanta changes as you pointed out, are falling rapidly.

        The primary point I sought to make was that falling gas prices will affect GA state highway funding more than most other states, because GA relies mostly on a motor fuel sales tax (tax based on cost of sale), while other states generally rely mostly or nearly wholly on excise (tax per gallon) taxes.

        To your point that we’re a dime cheaper than NC and SC—the difference will change with the change in the price of fuel. NC and SC rely almost wholly on a motor fuel excise tax. Price of gas falls a $1 / gallon, and GA’s gas taxes will be 14 cents lower than NC and SC—or 13 cents if your dime difference is based on the 3% of the 4% sales tax reserved for highways.

        Lower gas prices will further hurt GA transportation funding, yet there’s no easier time to raise gas taxes when falling prices conceal the increase from the oblivious, and cushion it from those paying attention.

      • saltycracker says:

        C
        Agree – Kroger gas in proximity will vary by 5 cents. Understand pricing variances around the state. But when the swing between GA & Fla gets prices inverted and FL is 10 cents + cheaper I jump to the only thing I can blame: S. Perdue – his tax free promos educated distributors/retailers on what they could get away with in the land of too low gas tax.

      • saltycracker says:

        C
        Agree – Kroger gas in proximity will vary by 5 cents. Understand pricing variances around the state. But when the swing between GA & Fla gets prices inverted and FL is 10 cents + cheaper I jump to the only thing I can (want to) blame: S. Perdue – his tax free promos educated distributors/retailers on what they could get away with in the land of too low gas tax.

        • Charlie says:

          I’m not sure that’s it (though I can’t prove it isn’t either).

          Florida is a very different state with a very different tax structure (because they have far more non-residents and tourists they can tap/tax). They also have a lot more tolls as we’re all aware, because many of their roads weren’t built as interstate highways.

          You’ll be seeing me use North Carolina a lot more going forward however. They’re almost the same size, have the same growth rate, almost identical demographics. Biggest difference is the lack of half their population concentrated in one metro area.

          • saltycracker says:

            I applaud your idea of North Carolina as a comparison state. Having done business and enjoyed relationships from there for a long time, they have earned my respect.

  5. androidguybill says:

    Allow me to be the right wing extremist this time since the usual suspects appear to be on vacation.

    About RFF
    Our Mission
    Resources for the Future improves environmental and natural resource policymaking worldwide through objective social science research of the highest caliber.

    RFF Today

    RFF is a nonprofit and nonpartisan organization that conducts independent research – rooted primarily in economics and other social sciences – on environmental, energy, natural resource and environmental health issues. Although RFF is headquartered in Washington, DC, its research scope comprises programs in nations around the world. Founded in 1952, RFF was created at the recommendation of William Paley, then head of the Columbia Broadcasting System (CBS) … RFF became the first think tank devoted exclusively to natural resource and environmental issues. or more than 60 years, RFF has pioneered the application of economics as a tool to develop more effective policy about the use and conservation of natural resources. Its scholars continue to analyze critical issues concerning pollution control, energy and transportation policy, land and water use, hazardous waste, climate change, biodiversity, ecosystem management, health, and the environmental challenges of developing countries.

    So, er, yeah. An environmentalist outfit predicting horrible outcomes for states that rely on the fossil fuel economy. Who could have imagined that? Dog bites man stuff. Look at their front page and you see the usual fracking skepticism articles, as well as a lot of stuff on endangered species, and a neat little article on how profitable biofuels will (allegedly) be for Ethiopia.

    I am as much for alternative energy (as Georgia does not have fossil fuel reserves worth mentioning) and new technology as the next guy, but I would rather see predictions of gloom and doom for the fossil fuel states from another source. The Los Angeles Times is already gleefully “reporting” that the falling oil prices will ruin the presidential campaign of Rick Perry and take down the entire conservative economic policy agenda along with it.

    http://www.latimes.com/business/hiltzik/la-fi-mh-is-the-oil-crash-about-to-snuff-out-the-texas-miracle-20141222-column.html

    Never mind that cheap oil is only a small part of the Texas economic boom. Never mind that the Texas economic boom long predated the increase in oil prices. Never mind that red states without oil income have also done very well economically (Florida, North Carolina, Ohio, Indiana and – when viewed in the proper context – Georgia, Louisiana, Wisconsin and South Carolina).

    • Dave Bearse says:

      Expensive oil, not cheap oil, helped fuel [pun intended] the Texas economic boom. Falling oil prices are currently taking down Russia.

      • Jon Lester says:

        Russia has diversified its economy so that oil only accounts for about 16%, and they’ve had the foresight to buy as much gold as possible in the last several years, even as our central bankers have given us “quantitative easement” and destroyed all incentive for average people to save. It won’t be long before you hear other people refer to North Dakota as Bakkenstan, when all that cheap debt catches up with the supposed oil boom.

        • Charlie says:

          The CNBC analysts have all been doing 2015 predictions. One yesterday’s main prediction was that Russia would default on its debt.

          Remember that Russia doesn’t just have it’s oil collapse problem, but also has an international sanctions problem. They’ve essentially backed themselves into a corner. What Putin does to try to get out of us should have us more than a little bit nervous.

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