The Economic Effects of Falling Oil Prices

The Price Drop Heard ‘Round the World

Oil Image Feb. Blog 2Few subjects stir up more conflicting ideas than the long-term effects of dropping oil prices. The world still relies on fossil fuels, and the bottoming out of oil prices has caused speculation about the future that ranges from cautious optimism to full-scale apocalypse. Even for people who are not in the oil industry, it’s hard not to notice when gas prices, after adjusting for inflation, are lower than they were in 1947.

While the world’s pundits and industry experts will never fully agree on the overall effects of cheap oil, the impacts are being felt on all levels: internationally, nationally, and regionally. However, in an area with this much volatility, a warning should be issued like the one seen on many takeout menus: these outcomes are subject to change without notice.

Difficulties in the International Scene

As reported by Bloomberg Business, one issue being posed by low oil prices can be seen in the countries exporting crude. In today’s economy, the world’s marketplace is more reliant than ever on emerging countries. These same countries make up a sizable percentage of oil-producers. Venezuela, for instance, is one of the world’s biggest oil exporters, and is experiencing serious problems with economic growth—all directly associated with cheap oil. If these emerging economies shrink or fail, it could have significant impacts on the rest of the world.

The Effects Felt at Home

The effects being felt in the United States are decidedly mixed. While the overall economy continues to grow, employment growth in the oil and gas industries is down—with some estimates around 30,000 fewer energy jobs created than expected. However, cheap oil has been highly beneficial to many consumers. Reduced energy costs can contribute to overall economic growth and savings on fuel, with some estimates in this area ranging around $1000 in savings for each American household for the 2015-2016 winter.
Regional Impacts

One might think that an oil-rich state like Texas would feel the heaviest brunt of lower oil prices. But, surprisingly, the Texas economy has been bearing the situation fairly well. While energy companies have cut some jobs, the state’s unemployment rate was recently measured at 4.2%–well below the national unemployment rate of 5.5%. This is due in part to the well-diversified job scene in Texas, with jobs in health care, education, and technology taking up some of the slack. Furthermore, with the recent lift of the oil export ban, the energy industry in Texas could be due for a comeback.

Weathering the Storm

We have been helping customers withstand the changes in this industry for over a decade, and continue to offer the finest quality fluid control products. As this story continues to unfold, you can count on us for the expertise and products that fulfill a full variety of energy industry needs. For more information or to get a quote, please contact us today.

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