Cheap Oil is Hurting These People -- Will It Hurt You, Too?

By Qiana Chavaia on 27 February 2015 0 comments

The economic effects of the precipitous decline in oil prices could mean tough times for some Americans. The last time the U.S. was hit this hard by an oil crisis was in the mid-80s; a five month period referred to as the 1980s Oil Glut that left oil prices staggering to recover for nearly two decades. (See also: Profit on the Oil Bust With These 10 Cheap Energy Stocks)

For now, most Americans are happy to save at the pump and to heat their homes more affordably. But some of us will feel the pain of lower oil prices.

1. Locals in Oil Rich Cities and Regions

The economic forecast looks grim for residents of oil-centric cities if oil prices continue to hover around $50 a barrel. Places like Houston, Dallas, Tulsa, Odessa, and Baton Rouge could feel spillover effects in their local economies. Towns in Wyoming and the Dakotas could also feel the pinch. Since oil is such an important part of these cities' economies, you don't have to personally work in the energy industry to feel the pain. Slowing construction, layoffs, and sluggish growth could impact these towns' broader economies.

2. Oil and Gas Industry Executives and Laborers

Already, major oil and gas companies have announced capital spending cuts leading to layoffs and the closing of plant facilities and oil rigs this year. Analysts say as many as 550 oil rigs could close in 2015. General Electric [GE], Halliburton [HAL], Apache Corp. [APA], Baker Hughes [BHI], and Civeo [CEVO], among others, have already announced significant job cuts. Thousands more are expected to lose jobs in Texas, alone.

3. Home Builders and Landlords

One effect of oil-related layoffs is a slow down in the housing market. Credit Suisse forecasts a 20% decline in the construction of new homes in Texas, and many of the largest homebuilders, like Lennar [LEN], are heavily vested in Texas cities. Sales for these companies are expected to drop. Analysts also predict higher-than-usual vacancy rates as workers move away due to job losses, which can pose a problem for rental properties.

4. Investors

Some investment banks have slapped a "sell" rating on home builder funds with high exposure to oil markets. But, before having a knee-jerk reaction and pulling your money out of the market, work with your financial advisor to devise a plan to weather the storm. Some analysts predict oil will trade at $70-$80 a barrel by year end. Now may be the right time to buy, rather than sell.

How have you been impacted by falling oil prices?

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