Posted on 07/16/2015 5:26:13 AM PDT by thackney
Cheap crude has hammered oil producing states to the point that they’re dragging down overall growth and erasing any positive effects from falling commodity prices on the economy, Goldman Sachs said in a report this week.
While the dive in crude oil prices from more than $100 in June 2014 to a little over $50 this month has meant the cheapest gasoline prices since 2009, consumer spending from that windfall hasn’t outpaced deep cuts to the oil and gas sector.
The research note said that slumping oil prices have meant dramatic declines in oilfield investments — fewer new wells are being drilled, and companies are slowing their purchases of drilling equipment. That led to the industry sapping about half a percentage point from U.S. GDP growth in the first half of 2015.
Oil producing states, including Texas, North Dakota, Oklahoma, New Mexico and Wyoming, are feeling the spillover effects from the industry slowdown in the rest of their economies. Non-mining employment growth in these states has fallen from 48,000 per month in the last three months of 2014 to just 4,000 per month from February to March 2015.
Total manufacturing growth has also taken a hit, with industries like construction equipment and iron and steel production feeling the effects of fewer orders from oil and gas drillers.
But Goldman Sachs also noted that the shock of the oil price collapse on the energy industry appears to lessening. The steep drawdowns in rigs reported by oil field services firm Baker Hughes for the last sixth months have started to level out, with double digit losses since December being replaced by a tiny uptick in this month.
Gasoline demand has also been rising as Americans take advantage of cheap fuel, having driven a record-breaking 720.1 billion miles in the first quarter of 2015. The increased spending on gasoline, plus other signs that Americans could be spending more overall, bodes well for broader growth trends.
A second big collapse in oil prices, however, could be disastrous for the shale states, whose companies need crude to stick to about $60.
My economy loves cheap oil.
I’m guessing you don’t supply valves, pipe, motors, MCCs, switchgear, Class 1 Div 1&2 instrumentation, heavy equipment, etc...
If higher fuel prices are good then lets quadruple the price.
“Cheap crude has hammered oil producing states to the point that they’re dragging down overall growth and erasing any positive effects from falling commodity prices on the economy, Goldman Sachs said in a report this week. “
Actually it illustrates just how hollow our so-called “economic recovery” really is. The energy sector was basically the only thing propping it up.
I would bet that someone told Obama that reagan won the cold war by killing the price of oil. So obama wants to do the same thing byo a deal with the Iranians.
except that no one told obama that the iranians are major supporters of terrorist organizations.
More govt programs funded by higher taxes are good for the economy too.
Go figure.... one of our country’s top 5 industries suffers, lays people off, and many of the companies associated with it go bankrupt..... and it overall hurts the National Economy. And the supposedly smart people in the world have to see it to believe it. What a bunch of dummies.
It was the Saudis who, at Reagan's urging, increased the price of oil in the 1980s to help destabilize the old Soviet Union. The Saudis are doing the same thing now, to reduce Russia's destabilizing influence in the Middle East. Russia has nothing to gain, on balance, from the resumption of Iranian oil exports to Europe and elsewhere.
But they told us drilling for our own oil was evil, so shouldnt this be good news for the progressives...??? Maybe they will actually get their dream of $8.00/gallon gasoline.
By reducing the price at the pump more money flows into the economy feeding local and national businesses. Seems like a pretty simple way of growing the economy.
I didn't complain about the cost of gasoline, or diesel, or heating oil that my business and my friends and neighbors had to pay.
Now that the shoe is on the other foot, I expect the energy industry to suck it up and not complain, just like I did.
Goldman's doesn't.
Yes, radical price changes do trigger dislocation costs. The unlucky do suffer disproportionately and are more visible. But considered from a macro POV, cheaper resources are a net gain.
I am sure the oil price drop has cratered some lucrative deals, and some Goldman bankers will be renting in the Hamptons instead of buying.
This article is talking about the jobs outside the energy industry that were driven by the energy industry.
If you sell valves, you sell to a lot of industries. But the energy industry is a significant chunk of your cash flow.
Climbing way over 4 bucks a gallon here in commiefornca!
California gasoline prices rise further as lengthier supply chain is strained
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