87.1 F
Fort Worth
Saturday, September 26, 2020
- Advertisements -
Business Cheaper oil buoys consumers, hammers producers

Cheaper oil buoys consumers, hammers producers

Other News

Petalo, not Charmin: Virus brings Mexican toilet paper to US

By JOSEPH PISANI AP Retail Writer NEW YORK (AP) — Toilet...

Mall owners close to buying JC Penney out of bankruptcy

By ANNE D'INNOCENZIO AP Retail WriterNEW YORK (AP) — Mall owners Simon Property Group and Brookfield Property Partners are close to a...

At Home launches collection with Fort Worth connection

At Home Group Inc. (NYSE: HOME), The Home Décor Superstore, has debuted an exclusive collection with interior...

Former Toys ‘R’ Us reopens as Havertys in Southlake

HAVERTYS (NYSE: HVT and HVT.A) will officially open its new store in Southlake Corners on Friday, August 21, 2020. The 32,300 square...

DALLAS (AP) — Oil prices have been lower for longer than expected. Now, with OPEC’s decision to keep pumping at current levels, analysts expect oil to remain relatively cheap well into 2016 and maybe longer.

That, of course, is good news for consumers and fuel-guzzling industries like airlines, but oil producers are being squeezed and thousands of workers in the oil patch have been laid off.

The price of a barrel of oil fell Monday to $37.65, a nearly seven-year low. Energy stocks, from giants Exxon and Chevron down to independent producers, took a beating.

What’s causing the upheaval? Simply put, supply and demand are out of synch, and that’s causing ripples across economies, creating winners and losers.


U.S. oil production rose from 5 million barrels a day in 2008 to an estimated 9.3 million barrels a day in 2015. That unexpected surge, coupled with OPEC’s unwillingness to cut production, left the world awash in oil and sank prices. Supply is outpacing demand by about 1.4 million barrels a day, according to Judith Dwarkin, chief economist at ITG Investment Research.

Meanwhile, economic growth has been slower than expected, undercutting demand for energy. China’s economy has slowed, Japan is in recession, and Europe continues to struggle. The U.S. economy is growing, but more-efficient cars have blunted the need for more fuel.

The U.S. government predicts U.S. production will drop 6 percent next year as oil companies curtail unprofitable projects. Globally, “it could take well into 2017 to work off the surplus inventory,” Dwarkin said.


Motorists see the effect of cheaper crude every time they fill up. According to AAA, the national average price for a gallon of regular gasoline on Monday was $2.03 and should soon drop below $2 for the first time since 2009. Gas is already below $2 at nearly two-thirds of the nation’s 130,000 gas stations, according to the price-watching site GasBuddy.com. A gallon of diesel is more than $1 cheaper than at this time last year, benefiting shippers.

Tom Kloza, chief oil analyst for Oil Price Information Service, says the nationwide average could drop as low as $1.75, before turning around in the spring, possibly going as high as $2.75 in time for driving season.

All that pocket change and low interest rates are leading many consumers to splurge on new cars, particularly bigger ones. SUV sales have jumped 45 percent since November 2012, when gas was around $3.63 a gallon. But car-buying in key oil states has tailed off, according to IHS Automotive. New vehicle registrations in Texas and North Dakota rose just slightly this year through September, after outpacing the nationwide growth in the boom oil years.

Saving on gasoline could improve shoppers’ holiday spirit. Cheaper gas “frees up money that could be spent elsewhere, so that’s a plus for holiday shopping,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics.

Cheap oil also translates to lower heating bills. The average household using heating oil will spend $1,360 this year, $493 less than last winter, according to the EIA.

Big airlines such as American, United and Delta burn billions of gallons of jet fuel every year, and savings from cheaper fuel are helping them post record profits. Thanks to cheaper fuel, travelers are seeing a slight drop in average airfares after five straight years of fares rising faster than inflation.


Oil companies, their employees, and their subcontractors are feeling the pinch from lower prices. Profits are down at the majors such as Exxon Mobil Corp. and Chevron Corp., but independents are suffering more.

“Exxon is not going to go out of business even if oil goes down to $10,” said Fadel Gheit, an energy analyst for Oppenheimer. But many smaller independents will be forced to consolidate because they can’t handle the higher costs of acquiring acreage, expensive drilling technology and declining fields in the U.S., he said. “It can’t get any bleaker.”

According to government figures released Friday, the energy and mining sector — that’s mostly oil and gas exploration and production — has lost 122,300 jobs in the last year. Paychecks for those still employed are smaller: Average wages in the energy industry have fallen 1.5 percent at a time when other workers are earning slightly more than they did a year ago.

On Monday, the NYSE ARCA Oil and Gas index dropped nearly 4 percent. Exxon and Chevron fell more than 2 percent, while smaller oil companies suffered steeper losses.


Several energy-producing states, such as Alaska, mapped out budgets based on oil at $50 to $60. Their plans are crumbling now that crude prices are around $40. Natural gas prices also are down sharply and the future for coal looks bleak. In North Dakota, overall revenues are 7.5 percent lower than were expected for the two-year budget cycle that began July 1.

Overseas, collapsing oil prices have undercut exports and the economy in Venezuela, leading to shortages of goods and contributing to the ruling socialist party’s defeat in legislative elections Sunday. In Russia, the government budgeted its spending on $50 crude. Its oil-dependent economy is expected to shrink 3.4 percent this year, according to the International Monetary Fund. On Monday, the ruble fell 1.3 percent against the dollar to a three-month low.

AP Writers Tom Krisher an Dee-Ann Durbin in Detroit, Ben Neary in Cheyenne, Wyoming, Christopher Rugaber and Josh Boak in Washington, Joshua Goodman in Caracas, Venezuela, and Lynn Berry in Moscow contributed to this report.

- Advertisements -
- Advertisements -

Latest News

Probe into ‘discarded’ ballots becomes campaign outrage fuel

By CHRISTINA A. CASSIDY and MARK SCOLFORO Associated Press HARRISBURG, Pa. (AP) — The news release from a U.S....

Southside Bancshares to ring NASDAQ opening bell on Monday, Sept. 28

Southside Bancshares Inc. (Nasdaq: SBSI), the holding company of Southside Bank, will ring the Nasdaq Opening Bell on Sept. 28, 2020 from...

East Texas official arrested for alleged mail-in voter fraud involving 2018 Democratic primary for local seat

By Emma Platoff, The Texas Tribune Sept. 24, 2020 "East Texas official arrested for...

As part of revived federal death penalty, Christopher Vialva executed for Texas double murder

By Jolie McCullough, The Texas Tribune Sept. 24, 2020 "As part of revived federal...

Houston sampling wastewater to track spread of COVID-19

By JUAN A. LOZANO Associated PressHOUSTON (AP) — Results from a program that's testing Houston's wastewater to monitor the local spread of...