Editorial: Is the Oil Plunge Too Good?

It’s time to wonder if crude oil, diesel fuel and gasoline are actually getting too cheap? A surprising notion, but for many people it’s already the case.

On the one hand, these super-low oil prices make diesel a great bargain. But on the other hand, the oil and gas industry isn’t buying trucking services as vigorously as it did several years ago, and falling oil stocks are dragging down the Standard & Poor’s 500.

On Jan. 20, crude oil futures closed at $26.55 a barrel in New York. The last time prices were this low was May 2003 — more than 12 years ago.

It’s not as if oil prices have been flat since then. In July 2008, crude topped out at $145 a barrel. As recently as July 2014 it was still above $100.

As vultures follow death, diesel follows crude. Also in July 2008, the national diesel average edged above $4.75 a gallon. Eight months later when the Great Recession hit bottom, so did diesel at $2.017.

In early January 2015, diesel was still above $3, but soon it may fall below $2 a gallon — where it hasn’t been since February 2005.

On the one hand, cheap gasoline means consumers have more money to spend on other goods and services, all of which have some trucking component. Congrats to those who haul for retailers, and indeed, for all truckers because cash flow is much easier to manage with falling fuel prices.

On the other hand, the Chinese economy is in trouble, so they’re not buying as much oil and other raw materials. Countries that produce oil or basic commodities are now poorer than they used to be, so demand for U.S. exports is way off, and export manufacturers are big customers of trucking, as are domestic oil producers.

This bouncing back and forth between arguments is why Harry Truman once said he dearly wanted to hire a one-handed economist.

What should the price of oil be? We have no idea, but we are glad there are markets to determine that. Markets will do a better job of price determination than would governments.

We’ll add, though, that this is the ideal time to raise diesel and gasoline taxes to pay for transportation projects. It’s a great pity this wasn’t in last year’s FAST Act law.

Whether you love today’s prices or hate them, keep paying attention because the only certainty is that they will keep changing.