Cheaper oil isn't such a benefit for US economy anymore as pullbacks in drilling cause damage

AP via Calgary Herald ^ | 05.19.2015 | CHRISTOPHER S. RUGABER

[thackney]

Full Title: Cheaper oil isn't such a benefit for US economy anymore as pullbacks in drilling cause damage

If there was one thing most economists agreed on at the start of the year, it was this: Plunging oil prices would boost the U.S. economy.

It hasn't worked out that way.

The economy is thought to have shrunk in the January-March quarter and may barely grow for the first half of 2015 — thanks in part to sharp cuts in energy drilling. And despite their savings at the gas pump, consumers have slowed rather than increased their spending....

So what did they get wrong?

It turns out that the economic effects of lower energy prices have evolved since the Great Recession. Corporate spending on drill rigs, steel piping for wells and railcars to transport oil has become an increasingly vital driver of economic growth. So when oil prices fall and energy companies retrench, the economy suffers....

[thackney]

Excerpted for AP, more data and analysis at the source

[rottndog]

Utter BS....

Cheap(er) oil may not be so great for oil companies, but the economy benefits greatly from people having more disposable income in their pockets when they don’t have to spend as much for their gas.

[thackney]

Many individuals benefit from lower fuel prices.

But many individuals have losses with fewer jobs, less overtime and resulting in significant less spending.

The US is the third largest oil producer in the world. We also have significant oil equipment and services supplied from us to the rest of the world.

It is naive to believe the drop in oil prices and the resulting drop in drilling, equipment, labor etc would not have an impact.

[rjsimmon]

Utter BS....

Correct. Also, their argument is a logical fallicy. There is not necessarily a cause-effect relationship between lower oil prices and drilling. During the time of lower drilling costs, that is when the need to drill in new locations becomes most cost efficient. ANWR...

[thackney]

There is not necessarily a cause-effect relationship between lower oil prices and drilling.

That is nonsense. Do you really believe a significant drop in oil prices does not result result in less drilling? Do you think it is coincidence that are active drilling rigs in the US is down by half?

[Cicero]

Of course, Obamacare has nothing to do with it.

[rottndog]

Less drilling leads to a reduced cost of drilling...which ultimately lead to more drilling...

[DoughtyOne]

All this talk about dropping oil prices, and I’m paying just shy of $4.00 per gallon of gas at the pump.

Someone care to explain that to me.

On the one hand the oil companies are telling me the value of their oil has dropped considerably, and on the other I’m paying near top dollar I’ve every paid for gas.

[paladinan]

I stopped reading, as soon as I saw “AP...

[arthurus]

The market does what the market does. Leave it alone. It will produce the optimum balance between production and price. Any attempt to tilt the balance from outside the market will make things worse all around, except for the enhanced self-importance of bureaucrats.

[rottndog]

Congratulations....you are now paying a Global Warming tax on the gas you buy in Kalifornia.

[ontap]

The price of energy affects virtually every business in a negative way except for the oil companies. Rex Tillerson said Exxon Mobile can do well at $40.00 a barrel....since he admits to that figure I suspect the real figure is less. Big oil has had a good run....the time to pay the piper is at hand.

[grania]

Except that people don’t have more disposable income. Any savings at the gas pump is being used up by higher insurance, tax, food staples and other necessities.

[DoughtyOne]

Yes, that’s true. It’s obviously an idiotic nonsense tax. It is just ten cents a gallon though.

Even without it I’d be paying a very high price for gas.

At one point I believe our prices topped out at about $4.65. Right now we’re paying about $3.90 per gallon. Some places are charging about $4.50 right now.

[DoughtyOne]

http://dailycaller.com/2015/01/07/ca-imposes-a-global-warming-tax-for-fuel-on-top-of-gas-taxes/

[rjsimmon]

Do you really believe a significant drop in oil prices does not result result in less drilling?

Depends upon what the drilling is for. If it is simple exploration, then yes, it will be reduced. But to create producing wells, then they stay the same.

Do you think it is coincidence that are active drilling rigs in the US is down by half?

This is where shale comes into play. Our oil production from shale has increased significantly due to the administrations hostile action against rigs. Saudi even increased their production to try and kill US shale production.

[thackney]

CALIFORNIA GASOLINE PRICES: THE DAMAGE DONE
http://spectator.org/articles/62791/california-gasoline-prices-damage-done

Why should its average price per gallon be $1.11 above the national average?

One big contributor to the price difference is the “special formulation” for gasoline in California. Think of it as special gasoline for a special state....

Another culprit in California’s elevated gasoline price is the “California Carbon Tax Law of 2014.” The tax took effect at the beginning of 2015. It mandates that petroleum suppliers buy “pollution permits” for the greenhouse gases generated by the fuel they deliver....

[Poison Pill]

I’m paying just shy of $4.00 per gallon of gas at the pump. Someone care to explain that to me.

Taxes for a large part. I see you're in CA. Here in Cook County IL (but not Chigaco proper) the cost is 3.20. Higher in Chicago proper. If I drive over to IN (about 5 miles) it's 2.99.

[ontap]

The drop in drilling rigs means only the rigs that were marginal are no longer active.....a lot of marginal rigs are being fracked instead of drilling new wells. Your constant ringing of hands over the plight of the oil companies leads one to believe you are closer than you let on. The price of oil is still higher than it should be. Oil is abundant and easier than ever to access. The true price should be around the $25-30 range.

[Vigilanteman]

We will see more benefits of cheaper gas this weekend as AAA predicts record travel for Memorial Day. That's money which circulates here at home to generate jobs rather than going overseas to give income to oil sheiks and their terrorist friends.