Benefits of cheap oil will come, but not soon

I'm still waiting for lower oil prices to bring about lower airfares.

I might be mistaken, but I think airlines are still charging the fuel surcharge. Since they implemented the added fee when and because fuel prices were high, they should have removed it long ago when fuel prices were well on their way to heading lower. What is up with that?

I read that ANA lowered their fuel surcharge, but exactly the same time raised ticket prices. Wasn't that convenient! I imagine that is what most of the airlines will end up doing. As a consumer we can't win. The system is rigged against us. I can't understand why gasoline prices are going up again. After falling, they have risen the past two weeks, even though the price of oil has dropped and the yen has strengthened.

“Alaska, North Dakota, Louisiana, Oklahoma, Texas, West Virginia and Wyoming are all states that will experience some amount of economic or fiscal fallout as a result of sustained low oil prices,” said a statement from the rating service Standard & Poor’s."

Interesting that it's generally the red states (Republican for non-Americans) that will suffer from lower oil prices. They have reaped the economic benefits in recent years and their politicians proclaimed the boom was due to their policies. I suspect now the blame for coming unemployment and deficits will shift not to oil fundamentals but to Washington and a president they love to hate.

U.S. financial authorities, starting with Fed chair Janet Yellen

Well, there's one big problem right there.

Strange no mention of Iran's oil coming on-line.

As a consumer we can't win.

Never will, as long as government palms are greased, and integrity in government flies up up and away.

I might be mistaken, but I think airlines are still charging the fuel surcharge. Since they implemented the added fee when and because fuel prices were high, they should have removed it long ago when fuel prices were well on their way to heading lower. What is up with that?

Airfare prices have come down, remarkably in many cases. The cost for our last flight to Hawaii was about half what it was the year before.

The reason that oil prices are crashing is because that unlike in previous times oil reached high prices, the US government has done nothing to intervene. America's economy, and those of the rest of the world are mainly oil-driven, and whenever energy prices become high, economies suffer as money formerly spent for other goods has to be spent on energy.

The Obama administration has not done what other administrations have done in the past, namely, to open up strategic reserves whenever prices spike. Also, large amounts of federal land have been closed to oil exploration, and just this week the Obama administration closed all federal land to coal miners (effectively killing the industry). American energy production has increased, but all of this increase has occurred on private land exploration. Much of America's land is owned by the federal government. Obama believes that climate change is the biggest issue facing America, not record numbers of people on welfare, increasing income inequality, or record numbers of people limited to part-time or minimum wage jobs. As a result, he has stood back and let oil prices remain high. But in doing so, he has set the stage for the current fall in prices.

What most people fail to realize is that the main reason for the strength of the "great recession", and the dismal "recovery" of the past 7 years has had to do mainly with energy prices. When people have to spend twice as much for gasoline, they buy less of other things. When transport companies have to pay twice as much for fuel, this extra cost is added to the prices of goods, further reducing consumption and economic activity.

The next president of America is very likely to inherit another recession. But lower oil prices will help in the recovery, if they stay low, that is.

All those power companies that were crying before on how they need to raise their fee for electricity are very quietly enjoying their big pay day. Funny how their prices only go up.

It has been this growth in US energy production, where gas and oil is extracted from shale formations using fracking, that has been one of the main drivers of lower oil prices.

I read that ANA lowered their fuel surcharge, but exactly the same time raised ticket prices. Wasn't that convenient! I

Only possible because we have zero consumer protection, no official agencies following those scamming practices.

I've gotten great airfares since around last summer.

sangetsu03, are we reading the same article? - which points out that a major factor of the plunge in energy prices is the boom in energy production in the United States that happened during the Obama administration. Saying "The Obama administration has not done what other administrations have done in the past, namely, to open up strategic reserves whenever prices spike," indicates you're unaware that Congress controls the SPR, not the president. Also, a neat accounting trick the GOP dreamed up has the U.S. selling off around 8% of the Strategic Petroleum Reserve - at these deflated prices.

I think high oil prices were more due to central bank actions (weakening the currency in which oil is priced) than anything the POTUS did.

And those high oil prices created an incentive for technological innovation in the shale sector, boosting US productive capacity.

Now productive capacity is high, the central bank is easing off the monetary spiggets, and oil is coming back down.

So I don't see this as much of a POTUS story. The POTUS was more into renewable energy and wasting tax payer's money on Solyndra and what-not, than doing anything for or against oil production.

As for Iran, I saw a chap on the TV this morning suggesting that Iran's extra oil might be over hyped. Due to the aged infrastructure that they have there, it might take them a while to truly ramp up output. If this view comes to prevail there might be a near term bounce in the price.

It has been this growth in US energy production, where gas and oil is extracted from shale formations using fracking, that has been one of the main drivers of lower oil prices.

This is only part true, the cost per barrel of oil right now is lower than the cost to extract one barrel of oil, so American oil producers are more or less sitting on their hands, they are not going to produce oil and sell it at a $10 per barrel loss. The reason for low prices is low demand; much of the expected increase in demand never materialized, economies in Europe, America, and Asia did not grow as much as their government economists predicted. This has resulted in a glut of production and supply.

Politicians can print whatever numbers they like to show off the "growth" of their economies, but in the end, the real-life market and economy show what is really going on. Oil prices have fallen, orders for metals have decreased, China is shuttering mills left-and-right. Reality sucks if you try to defy it for too long.

American oil producers are more or less sitting on their hands, they are not going to produce oil and sell it at a $10 per barrel loss.

I'd agree that a major factor in falling prices has been the economic slowdown in China and the countries which supplied it raw materials, but oversupply is equally as important. American oil producers WILL sell oil at a loss - many are in fact doing so now - if their only other option is to cede their operation to creditors. OPEC countries, which normally would put the break on production to stabilize prices, are not doing so now - each for their own reason. It is really a perfect storm.

And the big white elephant sitting in the middle of the room? Saudi Arabia flooding the market with oil while the economies sputter along (unless you're on Wall Street). Saudi and the US have been trying to conduct an economic oil war with Russia, but is has failed.

“Alaska, North Dakota, Louisiana, Oklahoma, Texas, West Virginia and Wyoming are all states that will experience some amount of economic or fiscal fallout as a result of sustained low oil prices,” said a statement from the rating service Standard & Poor’s."

Interesting that it's generally the red states (Republican for non-Americans) that will suffer from lower oil prices. They have reaped the economic benefits in recent years and their politicians proclaimed the boom was due to their policies. I suspect now the blame for coming unemployment and deficits will shift not to oil fundamentals but to Washington and a president they love to hate.

The oil producing states may suffer because the oil boom will limit the cash coming in, but states like Louisiana and the other states with oil refineries will still do well. They will hold onto the margins as much as possible to remain profitable. That is why there is always a lag in the pump prices. The oil refineries are still keeping their prices inflated with the excuse that they took losses while oil prices were so high.

Airlines are doing the same. Maybe prices have come down, but the reductions are not as fast as the costs have come down.

It is the classic ratchet effect, prices freely go one way (up), but they don't go the other way (down).

OPEC, particularly Saudi Arabia, is prioritizing market share over price per barrel. They don't want to lose market share from others like US and Russia and now that it's back, Iran too.

I see little correlation between oil and airfare prices.

In 2009, when oil was about $35 per barrel, I snatched a return ticket Vancouver to Narita for about $360 all in.

Oil is about $30 now, but airfare is running about $800 for the same trip.

And now Iran says they're gonna ramp up oil production because they don't want to lose market share too.