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Data: Energy Information Administration; Chart: Axios Visuals

The history of low oil prices juicing the U.S. economy was broken during the pandemic-fueled price collapse, Dallas Fed economists argue in a new commentary.

Why it matters: "[O]n balance this oil price decline has weakened rather than strengthened the U.S. economy, making this event different from past episodes of falling oil prices," they write.

What they found: Normally, low gasoline prices stimulate help the economy because people have more money to spend on other things, while high prices act as drag on growth.

  • But these are not normal times! "Shelter-in-place policies greatly and almost instantaneously reduce the gasoline expenditure share, thereby limiting the direct effect of lower oil prices on domestic consumers," they write.

The big picture: These tragically strange circumstances followed more structural changes over the last decade as U.S. production soared and petroleum imports declined.

  • The growth of the U.S. oil industry means that when it deeply cuts investment, which is happening now, it hits the wider economy.
  • That drag on investment "can be large enough to offset any consumption stimulus" from low prices.
  • Meanwhile, in most other industries, the downward pressure on production costs from low prices is actually quite small.

The bottom line: "In the current environment, the sharp reduction in capital expenditures by oil companies explains why this oil price decline, on balance, actually hurt U.S. investment spending — and hence, economic growth — not only in oil-producing regions, but overall."

Go deeper: EIA forecasts U.S. oil boom will reverse amid coronavirus disruption

Go deeper

Dion Rabouin, author of Markets
Aug 18, 2020 - Economy & Business

The American real estate conundrum

Reproduced from CivicScience; Chart: Axios Visuals

The housing market has been a solidly bright spot in the U.S. economy in recent months.

Yes, but: There remain serious questions about what the next phase for the market will be as the coronavirus pandemic has created an enormous amount of uncertainty about where and how people will live.

McConnell drops filibuster demand, paving way for power-sharing deal

Senate Majority Leader Chuck Schumer (R) and Minority Leader Mitch McConnell attend a joint session of Congress. Photo: Olivier Douliery/AFP via Getty Images

Senate Minority Leader Mitch McConnell has abandoned his demand that Democrats state, in writing, that they would not abandon the legislative filibuster.

Between the lines: McConnell was never going to agree to a 50-50 power sharing deal without putting up a fight over keeping the 60-vote threshold. But the minority leader ultimately caved after it became clear that delaying the organizing resolution was no longer feasible.

2 hours ago - Technology

Scoop: Google won't donate to members of Congress who voted against election results

Sen. Ted Cruz led the group of Republicans who opposed certifying the results. Photo: Stefani Reynolds/Pool/AFP via Getty Images

Google will not make contributions from its political action committee this cycle to any member of Congress who voted against certifying the results of the presidential election, following the deadly Capitol riot.

Why it matters: Several major businesses paused or pulled political donations following the events of Jan. 6, when pro-Trump rioters, riled up by former President Trump, stormed the Capitol on the day it was to certify the election results.

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