Oil Slide Has Pros And Cons
If the decline in oil prices has an end, there hasn’t been any sign of it. Monday morning saw oil prices drop again, this time to new five-and-a-half year lows.
Tuesday, January 13, 2015 - 00:00
Goldman Sachs, which forecast the oil slide would continue well into 2015, is now saying that prices might near $40 per barrel by the second quarter of the year.
On the London ICE Futures exchange, Brent crude for February delivery dipped 2.8% to $48.73 a barrel, close to its lowest mark since April 2009. On the New York Mercantile Exchange, WTI futures lost 2.6% to $47.12 to follow last week’s 8.2% slide.
US stocks opened higher on Monday but could not sustain the gains. The Dow, Nasdaq and S&P 500 have all fallen between 0.4% and 0.6%.
The good and the bad of falling oil prices
Oil’s persistent decline has a wide-ranging effect on a number of markets and regions – whether this impact is positive or negative entirely depends on the situation.
For many consumers, low oil prices is a benefit in their daily transactions. Anyone that drives a car knows why: gas prices are intrinsically tied to oil prices, so as oil declines, so too does gas at the pump. Currently, AAA indicated the average cost of a gallon of regular gasoline is down to $2.130 – a significant difference from the nearly $4 gallon of last winter.
“The fall in oil provides more of a boost than all the central bank’s actions over the last five years because it has found its way directly into the pockets of consumers,” Michael Hewson of CMC Markets told The Wall Street Journal.
On the other hand, some US states feel the pinch of oversupply.
MarketWatch reported. North Dakota, Wyoming, Alaska, Oklahoma and New Mexico all rely upon oil production for their economy and employment rates. North Dakota, perhaps the most dependent of the five states, had enjoyed the lowest unemployment numbers in the country in recent years thanks to the influx of oil-related jobs. Oil’s decline in the last year will cost North Dakota about $11 billion in 2015, which comes out to $16,000 per resident.
Ultimately, oil will find its footing and stabilize. It is difficult to say then that might occur, though some analysts point to the second half of 2015 as the turning point. Until then, consumers should fill their tanks and oil-dependent states should take efforts to create jobs in different industries.
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