Low Crude Prices Not Good for All

Low prices impacts Texas economy
Low prices impacts Texas economy

Texas gasoline prices are averaging under $2.00, the lowest we have seen in years. While this was a nice perk for consumers over the holiday season, it is still unclear how cheaper crude will impact the overall health of the Texas economy.

One Washington think tank has estimated that, though many parts of the country will experience a slight economic stimulus in 2015, the lower oil prices will bring a significant downturn in the economic health of energy dependent states.

Unprecedented production in the United States shale plays have contributed to an increase in worldwide oil supplies, resulting in gasoline prices plummeting to their lowest level in almost five years. This has proven to be an economic boom of sorts to American families who are pocketing an additional $25-$75 per month. An additional perk will come as reduced fuel costs will eventually affect the pricing of consumer goods and services.

The reduction in oil prices provides US consumers with what amounts to an annual increase in disposable income of $350 billion (about 2.0 percent of US GDP) through reduced prices for gasoline, diesel fuel, other petroleum products, and goods and services whose production uses petroleum products. The average US household will see a raw gain that amounts to $2,790 per year.
— Stephen Brown with Resources for the Future

The economic picture is not so rosy for everyone. Energy producers and states that are heavily invested in oil production will take a hit in 2015. Some companies have announced they will slash their budgets, with many predicting cuts in their exploration efforts. This will have a ripple effect that will impact local economies and support industries as tax revenues are reduced and layoffs are inevitable.

And Texas is not immune. The New york Times reports that Hercules Offshore has plans to lay off some 300 employees. This is in addition to the already 2,300 oil and gas jobs lost in Texas from October - November.

Download the entire report from rff.com.