Cheap energy provided by hydraulic fracturing, or fracking, lowered the annual cost of living for the average American by almost $750, according to a report published Tuesday by the Energy Information Administration (EIA).
The EIA report estimates that falling energy prices due to fracking for oil and natural gas have saved the average American household $747.30 annually since 2008. Between June 2014 and February 2016, the price for oil and natural gas fell by 71 and 56 percent due to fracking, making the price of gasoline and electricity fall to historic lows.
Energy prices dropped 41 percent over 2015 alone due to fracking, according another EIA report published in January. These falling energy prices have offset small increases in average cost of food, shelter and other items, according to the report.
This is good news for the economy. When the price of energy decreases, the cost of goods and services produced decline as well. Any product that is transported to market via truck or car uses gasoline and virtually every service uses electricity.Thus, low energy prices effectively reduce the price of almost everything.
This is especially great news for the poor, who tend to spend a higher proportion of their incomes on energy.
“It may not have a huge effect on the top 10 percent of households, but if you’re earning $30,000 or $40,000 a year and drive to work, this is a big deal,”Guy Berger, a Royal Bank of Scotland economist, told The New York Times. “Conceptually, this is the opposite of the stock market boom, which was concentrated at the top.”
Energy prices have been on the rise in Europe due to policies intended to slow global warming, which causes the continent’s costs of living to rise. Residential electricity rates in Europe increased by 63 percent between 2005 and 2014, according to the a Manhattan Institute study published in March. These polices hurt the poor 1.4 to four times more than they hurt the rich, according to a study by the National Bureau of Economic Research.
Polling indicates that 38 percent of British households are cutting back essential purchases, like food, to pay for high energy bills. Another 59 percent of homes are worried about how they are going to pay energy bills.
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