Academic journal article Monthly Labor Review

Lower Oil Prices, Texas, and the National Economy

Academic journal article Monthly Labor Review

Lower Oil Prices, Texas, and the National Economy

Article excerpt

In the summer of 2014, analysts predicted the price of a barrel of oil would remain above $100 until early 2015. They were wrong, and the opposite happened: oil prices dropped by more than 50 percent over the next 6 months. A combination of factors led to the price decline. Demand fell, and the supply of oil from both the Organization of the Petroleum Exporting Countries (OPEC) members and non-OPEC countries increased. Shale oil production in the United States increased concurrently.

Although some nations benefitted from the decline in oil prices, the impact of lower oil prices on national economies is not uniform the world over. For the countries that produce and supply oil, the impact is negative. For oil-importing countries, price declines are beneficial. In "Plunging oil prices: a boost for the U.S. economy, a jolt for Texas," (Dallas Federal Papers, vol. 10, no. 3, April 2015) economists Anthony Murphy, Michael Plante, and Mine Yucel say the macroeconomic effect to the U.S. economy was positive, but in eight states that have a high concentration of energy-related jobs--including Texas and North Dakota--lower oil prices adversely affected employment and tax revenues.

In terms of employment, Wyoming fared the worst because its percentage of jobs in energy industries is the highest of any state. Alaska's state budget similarly was hit hard as oil and gas account for 80 percent of its tax revenue. …

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