The Winners and Losers of Plummeting Oil Prices

Oct 8, 2015 10:00:00 AM by NuEnergen

oil pricesIf you've been enjoying the lower-than-average fuel prices, you're not alone. Individual consumers and corporations throughout the country are cheering at the pumps as prices continue to plummet. But while you're able to save money, it's important to understand the full reach of the price drop's implications. As with anything, this phenomenon will create both winners and losers, and responsible Americans will be interested in hearing both sides of the story. After all, the consequences could impact personal, business, and nationwide economies.

Winners:

So who, exactly, will reap the benefits of lower oil prices? Here's a look at who is likely to come out on top (at least for now):

Global Consumers -- The most obvious winners are all those individuals and enterprises which rely upon fuel for transportation via cars or airplanes. As oil prices drop, so do the costs associated with gasoline and jet fuel. Manufacturers will also benefit from lower production costs which, in turn, will prevent product prices from being raised for consumers. Because oil production is not being slowed down, a surplus of the commodity will continue to yield savings and positive outcomes for American consumers until a shift occurs.

Losers:

Before you get too excited about being a "winner", keep in mind that there are a number of others who will lose out as a result of lower oil prices. The losers include:

American Oil Producers -- Why have middle eastern oil producers declined to decrease output in the face of increased American oil production? Their hope is that some of their American competition will be swept away through bankruptcy, thus enabling them to increase prices and thrive again later. With oil prices down to less than $70 a barrel (as opposed to in the $100s), many are wondering how long the smaller-scale, independent American oil producers can hold up. Should the predictions of foreign competitors be correct, our own oil producers could be harmed.

Oil-Producing State Economies -- Oil-rich states like Texas and North Dakota have done exceptionally well in the face of national economic hardship. While the rest of the country has struggled to recover, these regions have experienced low unemployment rates and booming real estate markets. What happens, though, if these oil producers are wiped out by falling prices? Economies at the state level are sure to suffer as jobs are lost and financial security is diminished.

The Environment -- Generally speaking, the more inexpensive oil is, the more difficult it is for renewable energy sources like solar and wind power to remain competitive in terms of price. In addition to this, more people are likely to worry less about fuel-saving tactics such as walking, biking, using public transportation, or carpooling to work. Ultimately, this results in higher emissions and more damage done to the environment.

Winner AND Loser:

There are those, also, who will see both benefits and drawbacks from the economic climate of oil:

Central Bankers --  Remember when everyone was concerned that out-of-control inflation was imminent? In reality, commodities like energy and oil are experiencing price dips, which is dragging inflation levels down very low - so low, in fact, that central banks on a global scale are trying to get inflation high enough to reach their 2% annual target. While central banks will generally look at these swings in commodity prices as one-time events and try to enjoy the benefits, though, these shifts can create doubts about the credibility of the banks' promises to maintain a 2% rate of inflation, and this can create problems.

As you can see, there's a lot to be considered about the state of current oil prices. Are you worried about how the problems to be faced by the "losers" could impact the economy in the long run? See how SmartGrid paired with energy sourcing from our experts combine to get your energy budget under control.