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Comment by apples_oranges | Hacker News Reader

Well, I assume if economic activity is reduced, oil gets cheaper due to less demand, and this can have positive effect on some indicators.

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Oil prices are usually correlated with economic health. The better the economy, the higher oil prices. Trump saying he would lower oil prices sounded more like a threat to me during the campaign: yes, the price of oil went negative during his first term, but mix that wasn’t a good thing at all.

Yea the funny thing about oil prices is that if they go too low there's no longer a reason to pump. The US was the world's largest oil producer in 2024 but prices below about $60 a barrel mean most of that pumping isn't worth doing.

It's very rare that prices going down is good. It usually results in a spiral that is negatively self reinforcing. Price stability is what you generally want.

  > It usually results in a spiral that is negatively self reinforcing

In the case of oil, suppliers would stop pumping when it was no longer economically viable to do so, contracting supply and thus raising the price until it reached equilibrium. The same should be true of other goods. Why do you think that decreasing prices tends to create a downward spiral?

The price signal cannot function if it can only move in one direction.

I think you're both right. Prices going low means less incentive to pump, which leads to decreased supply and prices stabilize. Also prices going low means companies fold, people get laid off, the economy gets weaker, so demand goes down some more. These things are going to feedback until equilibrium is reached.

A related factor is what part of the ratchet we are in. In the 1800s the ratchet was "ever upward" and if economic factors shutdown some pumps there were plenty of incentives to keep that shutdown temporary and through more capital investment at it to bring back when market forces shifted again. In the 2000s we may truly be in the "downward spiral" ratchet where enough pumping shuts down, those shutdowns are permanent. There's far more competition from increasingly cheap solar and wind and other renewable energy sources than there ever was.

Eventually permanently decreased supply can also drive prices back upward, sometimes faster, as less competition means more supply-side bargaining power.

(Permanently decreased suppliers of oil may be a win for the planet in the long run, hopefully, but breaking the entire economy is perhaps the dumbest way to try to do that.)

Deflationary spirals are possible. Why would a consumer buy goods today if they’ll be cheaper tomorrow?

Negative prices at all points are market failures of one form or another. They're never good.

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