Oil prices have plunged 38 percent from June, hitting a five-year low last week. And consumers should be thankful, noted economist and CNBC Senior Contributor Larry Kudlow told Newsmax TV.
"This is a gigantic tax cut for the American economy," Kudlow said Thursday on "The Steve Malzberg Show" on Newsmax TV.
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"It's not a marginal tax rate reduction, I'm just saying it has the same impact. People will have much more disposable income to spend on other goods and services, and the middle class needs that because they've not had big wage gains."
Average hourly wages rose only 2.1 percent in the 12 months through November.
The oil price drop will be a boon for corporate America too, said the host of "The Larry Kudlow (radio) Show."
"Businesses need this," he argued. "Manufacturing companies and retailers and everybody else, they all have fuel costs, they all have heating costs. And all of those numbers are coming down, so it really lightens the economy. It is very pro-growth."
Saudi Arabia's reaction to the price move — it has cut prices itself and opposed production cutbacks — represents a "victory" for free markets, Kudlow noted.
"By that I mean the increase in supply has overwhelmed demand, and not even the Saudis can fight that. So it just goes to show you markets work."
Meanwhile, U.S. oil producers can still profit with crude in the $50- to $60-a-barrel range, Kudlow stated. And the break-even level might be even lower for companies producing shale oil through hydraulic fracturing (fracking).
January U.S. oil futures traded at $66.27 Friday morning on the Nymex, after hitting a five-year low of $63.72 last Friday.
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