Tumbling oil prices could lead to 250,000 jobs being lost in the US by mid-2015. Regardless of what you think about oil companies, these are real people, with real families and mouths to feed. Alaska in particular gets most of its revenue from oil and has already halted spending on new projects. Texas is also faced with rapidly declining revenue. In addition, Venezuela in particular is getting clobbered with bankruptcy now a distinct possibility. Russia is now is serious financial trouble, aslso at least in part due to lower oil prices.
Oil accounts for 95 percent of Venezuela’s exports and its government bonds have suffered as President Nicolas Maduro said he has no plans to curb fuel subsidies. Economic sanctions are also hurting Russia, pushing the country toward a recession.,
Falling oil prices are great for consumers though (as long as you aren’t in the oil idustry or a country that relies on oil exports.)
Prices will also need to sink a lot lower before they begin to recover if they are to close down today’s more marginal sources of excess supply.
All this is extremely good news for Western economies, for which lower oil prices act like a fiscal stimulus. For some states in the US which have come to rely heavily on the shale boom, a painful period of adjustment lies ahead. But the net impact for the economy as a whole is going to be positive, further fueling what already seems to be a self-sustaining American recovery. The first rise in US interest rates cannot now be far off.