Why Crashing Gas Prices Should Scare You

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Ordinarily, we like to keep the focus of our articles on the history, heritage and the tourism industry of the central Appalachian Mountains.  From time to time, however, we come across some news that we feel is necessary to pass on to our readers and this week, was such a time.

Obviously, the world is filled with “the sky is falling” rhetoric and today’s mainstream media does their job to keep us afraid of everything — whether it’s another named winter snowstorm or the dangers of eating potato peeling, there is never a shortage of things for us to be “skeered plum to death” about. 

Though we’re not trying to cause any such alarm, we simply wanted to state why the tumbling price of gas should be cause for concern by every person living in America.

Nationwide, the price of regular gasoline per gallon has fallen by $1.22 in one year’s time, leaving the average Virginian paying $1.99 at the pump.

For struggling and working families, this dramatic drop in gas prices has been a welcomed relief in what has otherwise been a barrage of bleak economic news over the past decade, however, as we survey the long-term consequences of this drop in oil prices, we find alarming signs as to the condition of the global economy, as well as frightening predictions pertaining to the future of our nation’s own outlook.

According to Michael Snyder, “There has only been one other time in history when the price of oil has crashed by more than 40 dollars in less than 6 months.  The last time this happened was during the second half of 2008, and the beginning of that oil price crash preceded the great financial collapse that happened later that year by several months. “

Unfortunately today, the United States is far more anchored and invested in the oil industry than we were seven years ago — this is in large part due to the shale oil booms of Texas and North Dakota, which contributed to making the United State the world’s biggest oil producer — so the stakes are even higher.

America’s booming oil industry has put millions of Americans back to work in better, higher paying jobs.  Whole towns and communities have been created in what was once seen as the wasteland of the Dakotas, unfortunately, many economists are believing that the fairy tale world the Roughrider State had been enjoying for the past handful of years is about to end.  The reason — unwilling to surrender their control of geopolitical affairs and the unimaginable trillions of dollars that accompany such control, OPEC has declared a price war on American shale oil producers.

Economist Brad Plumer, writes, “For all intents and purposes, OPEC is now engaged in a ‘price war’ with the United States. What that means is that it’s very cheap to pump oil out of places like Saudi Arabia and Kuwait. But it’s more expensive to extract oil from shale formations in places like Texas and North Dakota. So as the price of oil keeps falling, some US producers may become unprofitable and go out of business. The result? Oil prices will stabilize and OPEC maintains its market share.”

To steal another quote from an article written by Michael Snyder, “If the price of oil stays at this level or continues falling, we will see a significant number of U.S. shale oil companies go out of business and large numbers of jobs will be lost.  The Saudis know how to play hardball, and they are absolutely ruthless.”

Speaking on this subject, Jawad Mian of Outside the Box, writes, “Robert McNally, a White House adviser to former President George W. Bush and president of the Rapidan Group energy consultancy, told Reuters that Saudi Arabia ‘will accept a price decline necessary to sweat whatever supply cuts are needed to balance the market out of the US shale oil sector.’ Even legendary oil man T. Boone Pickens believes Saudi Arabia is in a stand-off with US drillers and frackers to ‘see how the shale boys are going to stand up to a cheaper price.’ This has happened once before. By the mid-1980’s, as oil output from Alaska’s North Slope and the North Sea came on line (combined production of around 5-6 million barrels a day), OPEC set off a price war to compete for market share. As a result, the price of oil sank from around $40 to just under $10 a barrel by 1986.”

The bottom line is this — The price of oil is dropping faster than a bad face lift, and is doing so by deliberate design of the member-nations of OPEC.  They’ve played this game before and their pockets are deep.

The American shale oil industry, in its infancy, will find it hard to compete in the days ahead and may one by one begin going out of business, unable to absorb the insanely low oil prices we may soon be witnessing.

For the average American going to fill up their vehicle at the pump, the drop in fuel prices is a welcomed news and will provide an opportunity for them to breath, but for the millions of our countrymen whose jobs are affected by the oil industry, this is serious business and the outlook is very grim.

When.. or if… the American shale oil industry collapses, the shock waves of that fall will be felt around the globe, especially in the communities that have built themselves around a solitaire industry.

Though no one knows what the future holds and how this story will be ended — we can only hope and pray that the workers in Texas and Dakota come out of this price war victorious.  However it ends, there are some undeniable lessons we can walk away from this with:

1.) OPEC countries are not our allies and do not have our best interests at heart.  This should be a no-brainer, but sometimes it’s necessary to repeat the obvious.

2.) Any community built around a single industry, albeit coal, a large manufacturer, tourism or anything else, is just one phone call away from looking like a ghost town along historic US-66… or US-52 for that matter.

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3 COMMENTS

  1. It all depends on who you want to rob you. Saudis in Middle East or rich Americans who want to keep us at war in Middle East why they take their profits and hide them in off shore accounts. Where do you get your facts about millions of jobs in fracking oil industry ; is it the same place the keystone pipeline gets those thousands of jobs. As long as we let the fossil fuel boys dictate the debate we will always be at their mercy.I am disappointed that a magazine like yours would write a article like this and in a off hand way pretend like this is the only choice we have

  2. Really- I live in Washington Co, Pa the largest propane producer in the USA. Propane is not going anywhere. Down here we are all about ‘wet gases’ like the propane. The shale drillers will continue to frack and close ‘shut in’ the wells. The ones getting duped are the land owners who think they are going to make a fortune but is the well is no producing then they make no money. Fracking is here, they are not going to stop. Compressed Natural Gas CNG and Propane for heating is not going away. This the a rouge…Thinks about all the trucking companies and folks that drive for a living. Depending on who you are it is saving American lots of money in fuel, thus they are able to travel in their own country on vacation and not merely able to afford to drive to work.

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