Gasoline is relatively cheap, so why isn't the economy a high-octane engine? Consumer caution plays one role.

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The hinge of business history made a noisy squeak this week when Standard & Poor’s downgraded Exxon Mobil’s debt from AAA, a position the company (actually its predecessor) held since at least 1949. Now only two U.S. firms hold this coveted rating: Microsoft and Johnson & Johnson.

Oil prices, which have collapsed since the summer of 2014, have caused Exxon’s debt to more than triple over the past few years. But it’s not only an oil major that’s singed by the price fall. The dramatic turnaround hasn’t given the economy much of a boost. Less expensive gasoline prices (around $2.35 in Washington state) haven’t translated into higher consumer spending.

This is a subject that researchers for the Federal Reserve Bank of San Francisco noodled over. Their conclusion is that people have preferred to increase their savings and the behavior might only change if they believed the low gas prices were really here to stay.

As the Fed’s policy setting committee wraps up two days of meetings, this is no doubt weighing on the central bankers. Fed Chair Janet Yellen last year hoped for a cheap-oil dividend of sorts. Instead, growth has been middling — real GDP up 1.4 percent in the fourth quarter — while job growth has been steady but slow, wages stuck.

After being whipsawed through two nest-egg-destroying recessions in less than eight years — and both brought on by the malfeasance of big business — average Americans are rightly wary. Many have also landed in lower-paying jobs or the tenuous, no-benefits “gig economy,” or lost wealth because of the economic turmoil.

The caution is understandable, especially because buying ever more stuff depends on going into debt when one hasn’t had a real raise in years. As the chart shows, growth in personal consumption expenditures has been weaker after each recent downturn.

A couple of more pieces of perspective. First, America is an oil-producing nation. So it will feel the downdraft of falling oil prices, too. The bust of the early 1980s caused regional recessions in the Oil Patch. Today the damage is worse because the “fracking revolution” was heavily dependent on debt, now turning bad.

Second, it’s difficult to prove a negative — how much slower the economy would be if oil prices were still $100 a barrel. Sectors such as transportation have undoubtedly benefited. The diverse U.S. economy is doing better than any large nation in the world today.

Finally, oil prices only tangentially affect what really ails American growth: slow demand, the aftershock of the Great Recession. With government austerity and many companies failing to invest enough in innovation, that’s unlikely to change soon.


Today’s Econ Haiku:

Sing of Viadoom!

While West Seattle sits there

No light rail for you