Less than $2 per gallon. That’s the average price most Americans are currently paying at the pump, as the price of oil continues to plunge even further. While the news translates into savings for many people (an average of $750 per year), others are paying a much bigger price. Oil companies continue to shut down drilling rigs in states like Texas and North Dakota, causing thousands their jobs.
So what does this mean for our economy? In many towns across the US, these oil companies are the main source of employment and while many American oil workers are faced with layoffs, or looming worry, consumers are also glad to pocket substantial savings as they fill up their tanks. However, with the increasing number of unemployed oil workers, the economy could take a hit.
According to CNN Money, this could also mean the housing market will suffer as well, since many hard-working people cannot afford to live in these towns without these jobs. New construction will come to a halt and rent prices will begin to decline. For some real estate investors, that could translate into fewer returns and less disposable income for quite some time.
While these workers’ lives are now disrupted, they’re forced to make difficult decisions. Some workers’ hours have been cut drastically, while others have simply been laid off due to rigs that have halted production. Leaving many with no other option, but to relocate and look for work elsewhere – increasing the nation’s unemployment figures once again.
People are forced to take whatever jobs they can find, which will make job-hunting an even more arduous and competitive process. And while some have been in this industry for decades, the transition into another sector will not be easy.
On the other hand, those Americans who aren’t negatively affected by the current situation may see this as a relief and a chance to put more money away. Not only will fuel savings be evident, but utilities directly tied to coal and gas will also be impacted – providing additional savings. It would create an upsurge on the nation’s GDP, while also bringing down the inflation rate.
The steep drop in oil prices (as low as $45 a barrel) could also spark a desire for some shares in blue-chip energy firms. However, investors looking at this as a bargain should think twice. Considering the volatility of the energy market, patience will be necessary – as it may be a long time before the price of oil rebounds. Either way, commodities, in general, are risky investments, which individual investors should consider twice before gambling their investment.
Many factors are directly affected by plummeting oil prices. What impact do you think this will have on the economy?