In the last couple of months, the sharp reversion in oil prices has certainly caught the world's attention. While the majority of economists and analysts continue to expect incorrectly that falling oil prices are a positive input to economic growth, the reality is that it is not. The negative impact to economic growth from the decline in oil prices are quite considerable when you consider that almost 40% of all the jobs created since 2009 have been in energy related industries. 

Furthermore, many of those jobs are in the highest wage paying areas of the country that leads to more consumption and further job growth in other areas of the economy. In fact, for each job created in the energy sector there are nearly three jobs created elsewhere in the economy.

“What we have here is a failure to communicate.” – Cool Hand Luke, 1967

As I discussed at length previously, the current problem in the energy price is a realization of a supply / demand imbalance.

“First, the development of the‘shale oil' production over the last five years has caused oil inventories to surge at a time when demand for petroleum products is on the decline as shown below.”

“The obvious ramification is a ‘supply glut'which leads to a collapse in oil prices. The collapse in prices leads to production‘shut-ins,'loss of revenue, employee reductions, and many other negative economic consequences for a city dependent on the production of oil.”

Once you factor in the negative economic consequences of the decline in oil prices, any perceived positive impact from lower gasoline prices,by the consumer, will be quickly negated. (Read more here)

However, if you don't believe me, here is T. Boone Pickens:

$33 Oil – A Return To Normalcy

While the economists and analysts are hopeful for a sharp recovery in oil prices, the current decline in oil prices is nothing more than a return to historical normalcy. Let me explain.