The Domino Effect of Falling Oil Prices

The Domino Effect of Falling Oil Prices

by | Energy Conservation, Sustainable Energy

There’s something beautiful about going to the gas station, filling up your car and not maxing out your credit card. The past few months have given drivers a serious break at the pump, with gas prices dropping to levels not seen in more than a decade. While this has consumers doing the happy dance, it isn’t great news for oil and energy companies that suffer when prices drop.

An increase in American and Canadian oil production has caused a decrease in demand and cost of foreign exported oil. That equates to a tremendous supply of oil and gas in the market, which pulls down prices. This, coupled with an increase in energy-efficient automobiles, especially in European countries with tumbling economies, has driven down the price of oil, and therefore, what you pay at the pump. Nevertheless, U.S. oil producing states such as Alaska, North Dakota, Texas, Oklahoma and Louisiana are all affected by this turn of events. Chevron, Shell and BP cut worker pay and other smaller gas companies are even worse off. Energy companies suffer the same negative repercussions, as energy prices are directly impacted by the price of oil.  Energy companies have smaller gains, bigger losses and employees and staff are cut.

The lower gas prices for the average consumer makes a big difference to the bottom line for energy and oil companies, but it doesn’t stop there. Petrochemical products – chemical products derived from petroleum – such as coal, natural gas, fertilizers, plastics and renewable resources like corn and sugar cane, also drop in price, affecting the people who work in those industries. It’s all one giant game of oil-soaked dominos.

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The final domino in the track is the economy. Large oil companies often invest heavily in local, national and global manufacturing and construction projects, and if they’re unable to do so, then the people who would be paid to work those jobs are suddenly without employment.  End result is that there are fewer jobs for the taking.  And if people don’t have jobs, they clearly don’t get paid and they can’t participate as heavily in the buying and selling that perpetuate our economies. Fewer meals out, less is purchased at the supermarket and shops, homes aren’t built and cars stay on the sales lot.

So while many of us enjoy the extra cash we earn by saving at the pump, remember that there are others out there hoping for a surge in gas prices, which positively affects their ability to earn a living and pay for life on this planet.

As we all know, it’s a slippery slope this whole global economy thing.  And oil prices control a huge part of the push-pull of the marketplace.

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