Crude oil prices play a palpable role on many levels in the interpretations of US economic health. For you, the consumer – a very important cog in the nation’s economy – it directly translates into how much spending money you have in your budget. Lower pricing can have the effect of an unexpected, beneficial stimulus to you and the country overall. Lower pricing can add to the GDP, a very important economic factor.
When you compare these normally positive effects of lower crude oil pricing to the effects they can have on the stock markets, however, you often see a different reaction. It typically creates volatility because the markets react to global trends and news. So, while lower oil prices can appear to be a good thing, there are consequences.
Because US oil production is at its highest levels in decades, cheap foreign oil can be competition to these homeland markets and perceived as a threat. Additionally, lower prices can even be a threat to some of the OPEC countries, like Russia and Venezuela, whose budgets depend on a high profit margin from their oil production. That’s because these countries have high extraction costs and need per-barrel pricing to remain high so they can make a good profit margin.
What is beneficial at the gas pump becomes threatening to US oil producers. Low prices threatens some OPEC countries, creating strife among the members, as is being reported this month. These scenarios have been materializing since the summer when prices began to drop. This is part of the stock market volatility picture.
We, as consumers, can have a very hard time deciding if we should be worried or not as we think about home buying or seling. Is it a good time or not? Trying to understand all the reasons, to the best of our ability, can calm the waters and begin to make it more clear that these kind of disturbances, though constantly in the news, have little bearing at this current time on the security of buying or selling a home.
It is a good time to buy or sell. Mortgage rates are still at historic lows. This factor greatly improves buying power. Higher interest rates on mortgages will reduce how much home you can afford to purchase. To understand more about this contact me.