There’s an old rule of thumb used by economists: For every 1-cent drop in the price of a gallon of gas, Americans have an extra billion dollars of money to spend on something else.
That used to mean it was good news when the price of oil went down, which it did by more than 30% today after Saudi Arabia announced it would flood the market with extra oil and slash prices as part of a price war with Russia. When gas got cheaper at the pump, drivers would end up with more money to spend on other stuff, and because energy was cheaper, all the other stuff produced using energy would be cheaper too.
But in the spirit of everything in the world now being broken, that rule of thumb is now kind of broken too. The US has become the world’s largest oil producer, and states from North Dakota to Louisiana and Texas are home to oil drilling boomtowns full of high-paying blue-collar jobs.
That’s mostly good news, aside from the way it destroys our environment and dooms our future. But it also means that the other side of the oil price equation now matters much more. When oil becomes cheap, oil producers get into financial trouble, scale back their drilling, and lay off workers. So do the companies, based all over the country, that supply the oil industry with everything from pipes to trucks and catered meals.
That’s why the US economy didn’t go into boomtime when oil prices last crashed in 2015 and 2016, falling from more than $100 a barrel to less than $40. Gas prices dropped below $2 a gallon, and people celebrated by buying new cars in record numbers and spending more on holiday shopping. But by the end of 2015, there had been 60,000 jobs lost in the oil and gas industry in Texas alone and the booming oil towns of North Dakota were seeing an exodus of jobs and people.