It's even bigger than it sounds. There's a multiplier effect, probably 4x to 5x, on incremental purchases triggered by this windfall. Given Americans' horrible track record in saving, I'd assume that effectively all of this $75 B will be spent, effectively adding > $300 B to economic activity.
On the other hand, there will be some parts of the economy hit, hard, by this price decrease. On net, though, this price decrease is really good news for the U.S. economy and even for Tesla. As JHM points out, extra wealth is extra wealth, and people will spend it across all products.
I wonder if the losses in the US oil industry have the impact of reducing the multiplier effect so that in stead of 4x to 5x, we're looking at 2x to 4x. Even so, this is pretty big stimulus.
Some people have compared this to a tax reduction and argue that the stimulus should be higher than a $75B tax cut. The reason is that the gas savings is well spread out across economic strata. By comparison, tax breaks mostly favor those who highest taxes, so a tax break is concentrated among families least likely to spend all of it. So I would expect that most of the gas price savings will be spent immediately, which in turn may yield a strong multiplier effect.
Additionally, low oil will reduce the costs of all sorts of goods and services across the economy. Tesla as a manufacturer will no doubt share in this.
The US consumes about 19 million barrels of oil per day, close to 8 billion barrels per year. So a $30 reduction from $90/bbl to $60 is an aggregate savings of about $240B. AAA accounts for only $75B for consumers at pump. The other savings of $165B, then must accrue to industry and government. The savings to industry, then, may translate into lower prices for goods and services; while the savings to government helps to balance budgets. I would expect there is some sort of multiplier effect to these savings as well. For kicks, let's suppose that the savings to government is $75B and has a 1x multiplier, savings to industry $90B with 3x, and savings to consumers at the pump $75B with 4x. Altogether that would be a $645B increase in economic activity.
This economic stimulus may only last a year or two. However, much longer term, say 20 years out, EVs may have a strong enough presence in new car market that EV force arbitrage pricing on the oil market permanemtly driving the oil of oil down to parity with electricity, which in turn is bounded above by the low cost of solar and batteries. Thus, the price for oil is driven down below $25/bbl in today's dollar. Basically, oil drops this low or people buy only EVs until damand falls down to this level. Central to all this is the declining cost of batteries which basically facilitate arbitrage across all energy markets allowing the lowest cost fuels, renewables, to dominate. So at this point the stimulative effect of a lower cost of oil are structurally locked in.
I don't think we're there yet. Right now I thing OPEC simply wants to defend market share from other oil producers. But in the long run, oil will lose market share to renewable electricity mediated by batteries. This is why the Gigafactory is so important. The best use of the current oil price war should be to lower the cost of manufacturing batteries, EVs, and renrenewable energy devices. Make them cheap today, and they will generate energy dividends for decades.Low oil prices are not an occasion to pull back from investing in renewable. Just the opposite, it is the time to double down the investment and lock in low manufacturing costs. Hopefully, we'll see a solid boost to the economy which on balance will support demand for Tesla's products while the cost of supplying those goods is down too. Cheap oil can, and I believe will, improve both demand for and supply of Tesla's products. $645B is a huge windfall for the US economy, and Tesla stands to be as much a beneficiary of that windfall as any company that makes desirable consumer goods.
