Why are some economists claiming that lower oil and fuel prices are bad for the economy?
It's because they're looking at both halves of the economy, supply and demand. While lower gas prices are great for demand (consumers), they can cause problems for supply (providers).
There's no mistake that cutting fuel prices is great for the average Jane and Joe. The Wall Street Journal offers a comparison by Eric Morath:
Lower Gas Prices Like Huge Tax Cut for Middle Class
Others of course are comparing lower fuel prices to a raise, but the difference is in the taxes paid. You pay higher taxes when you get a raise, but you keep more of the money when your taxes are cut. So the "huge tax cut" comparison is probably the most apt.
The WSJ also points out some of the international implications. Here's Ian Talley:
Oil Price Winners and Losers Around the Globe
Harm to the economy is most likely to hit the manufacturing sector. Here's the WSJ's Timothy Aeppel:
Cheaper Oil Will Actually Hurt Factory Sector’s Growth, Manufacturers Say
But you know, if you're not producing drilling rigs or piping, lower prices on gasoline and other fuels probably has you dancing. Not only for shippers and airlines, but also for retailers, who will pay less for stocking their shelves. Eric Morath at the WSJ again:
Oil Prices Pushing Down Business Costs, Not Just for Airlines, Shippers
So is it more likely to help or hurt? Let's give the final word to Larry Kudlow at the conservative online magazine NationalReview.com. He points out that lower oil prices are likely to drive up the value of the U.S. dollar, which in turn would lower prices of other commodities, including foods, and also mitigate against higher inflation.
Lower Oil and King Dollar Are Unambiguously Good
Yeah, lower fuel prices will shake out some industries. But for once, it's gonna work to the good for the besieged middle class. To me, that's pretty good.