Although I think lower prices will definitely help the economy it would seem to me such a drastic drop would initially have a negative effect on GDP. Keep in mind this drop in oil not a reaction to a major economic downturn like in 2008.
To quote PGalt in another thread
Oil price collapse claims WA’s Red Fork Energy, shale gas company in receivership (1st Major Victim)
http://www.freerepublic.com/focus/news/3236760/posts
“Sometimes you have to wonder whether the highly educated spokesmodels on the corporate mainstream media are really as vacuous and clueless as they appear or whether they are just paid to look pretty and mouth the corporate line. They seem incapable of comprehending the unintended consequences of various events. The collapse in oil prices is one of those events.
There is no doubt that lower oil prices will lower the price of gas for the average American. Estimates say they will save $368 per year, which can be spent elsewhere. The highly paid shill economists who declare this will boost spending seem to be math challenged. Retail sales figures include gas stations. What isn’t spent there will be spent in another category, most likely healthcare or groceries as prices in both areas continue to escalate. It’s a zero sum game. No new spending will occur.
The worldwide supply of oil has only increased marginally over the last few years. The U.S. shale boom has been offset by declines elsewhere (Libya, Iran, Mexico). The reason for the collapse is the same reason for the 2009 collapse – worldwide demand is contracting. Europe is in a depression. Japan is in a depression. Russia’s economy is contracting. China is decelerating rapidly. The U.S. demand is flat. The implications of another global recession after five years of central banks printing trillions of fiat currency are alarming to say the least.
The cost to extract shale oil and transport it to a refinery capable of processing it is high. Honest analysts will tell you that a price of $70 to $80 is required to breakeven. Most companies don’t build breakeven into their plans. Bakken shale oil sells at a discount of about $14 per barrel due to the difficulty of extraction, transport, and processing. It is now selling for $47 per barrel. The number of permits for new rigs fell by 40% in November when oil was still selling for $75 per barrel. Do you think permits for new wells will fall at a price of $61 per barrel? Capital spending by the energy industry accounted for 33% of all capital spending in the last few years. I’m sure some other industry will pick up the slack. Right?
It seems the shale oil boom has resulted in a few jobs being created since the 2010 recession trough. In fact the states where fracking is prevalent have accounted for all the job growth in the nation. I wonder if a shale oil bust will have any employment implications. There are 9.3 million jobs related to the energy industry across the country. The plunge in oil prices created by Saudi Arabia in the 1980s created a depression in Texas which contributed to the S&L crisis. This plunge will reveal who has been swimming naked in the high yield bond market and derivatives market.
More from Jim Quinn via The Burning Platform blog in this OUTSTANDING article posted here...
http://www.zerohedge.com/news/2014-12-11/should-you-believe-what-they-tell-you-or-what-you-see
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I think you could be right, a reduction in the total price of oil produced --even if more barrells of it actually go on the market-- cranks out to a negative for the GDP. imho this is a bad thing for using the GDP, but not a bad thing for the economic well-being of the American people. Kind of like the way a big hurricane can destroy all kinds of property and kill thousands, and then in the end all that money spent on rebuilding gets translated into an increased GDP.
We're only talking what "could be" though, and it's not what's happened every time the price of oil dropped in the past.