Tom: This morning we are talking about low oil prices, is that right?
Mellody: It sure is, Tom. This past week, the price of a barrel of oil fell again, and for the second month in a row is under $50 per barrel. We have not seen oil prices stay this low for this long since the Great Recession. You might be asking yourself why this matters, but it does! The price of oil has a big impact on numerous aspects of our economy, and is itself affected by a number of factors. So this morning, I want to talk about why oil prices are so low, what this means for our economy, and for consumers like you and me.
Tom: OK! Let’s begin with why are oil prices so low right now.
Mellody: There are a number of negative consequences that result from these record low oil prices, and a major one is that it is hammering the energy industry hard, resulting in numerous job losses. Companies are really trimming their labor forces to deal with losses. In total, over 100,000 jobs have been lost in the energy sector since oil prices began their free fall earlier this year. Now 100,000 jobs is not a huge number in the big picture, especially since the U.S. economy is creating nearly twice that per month, but for cities like Houston, Texas that are very dependent on the oil sector, these numbers add up, especially because jobs in this sector pay very well.
Tom: Any other negatives?
Mellody: One interesting piece is the environment, where you see both negatives and positives. Low oil prices do make more environmentally friendly energy technologies, such as solar or wind power, less competitive. When oil prices were high, these technologies were expanding rapidly because they had gained greater competitive advantage. On top of that, when gas prices are low, people tend to use more of it, and burning more oil increases carbon emissions, which contribute to climate change.
Money Mondays: Lower Oil Prices And What That Means For You was originally published on blackamericaweb.com