Oil prices at the pump haven’t been this low since 2003. The U.S. Energy Information Administration predicts that prices will stay low through 2017, although not as low as they are now. This is good news for the many small businesses that pay for gas for their cars and trucks. Hopefully, low gas prices will also translate into lower delivery costs and other savings for small businesses.
But the low cost of gas at the pump is not good news for all small businesses. As the saying goes, one person’s bad luck is another person’s good fortune (don’t know who said this). Those adversely affected — directly or indirectly — by lower oil prices:
- Small businesses in Alaska face a variety of higher taxes. Because of lower oil prices and the hit on the oil industry, the state is facing a $4.1 billion budget gap that it hopes to close in part with higher taxes. Fishermen and others in the fishing industry as well as in the mining industry likely will see some tax hikes.
- Small businesses in North Dakota could see their local economy hit hard. The extent of the impact, and whether the state will do anything taxwise, remains to be seen.
- Small businesses in Wyoming, Texas, and Louisiana, other big oil-producing states, could face higher taxes as the states lose revenues that had previously come from the oil industry.
Impact on the overall economy
You only have to look at how Wall Street is reacting to lower oil prices to know that lower prices isn't all good news. If the industry as a whole kills jobs, this reverberates throughout the economy.
And small businesses in all states could face higher taxes because of lower overall gasoline tax revenues. The Tax Foundation said that “lower fuel costs are bringing in less gas tax revenue in some states, causing budget deficits.”
Impact on world events
The global economy is also affected by lower oil prices. What will this mean for Iran? Russia? How will this translate into instability through regions of the world? And how will instability impact small businesses here?
Bottom line: Don’t spend all your savings at the pump just yet!