In January, I outlined how lower gas prices were ruining my life. While this sounds a bit on the dramatic side, I’m only exaggerating with that title by not specifying that lower gas prices are ruining my financial life.
As I discussed before, my husband sells steel for a living. His best customers have always been the people involved in the petroleum industry. Until January of this year, that is. The writing was on the wall for the oil industry in December, 2014, but in January the writing was no longer written–it was chiseled in stone.
Brief history: The U.S. (and Canada, for that matter) had began to ramp up oil production a few years ago in an effort to become less dependent on foreign oil. It also created jobs and had pleasant side effects for people like my husband who was suddenly getting orders for materials needed for this increase. Fracking, although controversial, was also in full swing. Existing oil drilling sites had began expanding in the last couple of years as well. New businesses had opened up in the last few years as well, taking advantage of the favorable market for oil.
Fast forward to January, 2015: OPEC (Organization of Petroleum Exporting Countries) decided to increase oil production. This translated to cheaper oil by the barrel, which had consumers in amazement as gas at the pump prices dropped to just under $2.00/gallon.
Everyone was happy with the lower prices–except for anyone dependent on the oil industry for a steady income. At least the laid-off workers didn’t have to pay as much to fill their tanks I guess.
Fast forward to last Friday, June 5th:
OPEC had their semi-annual meeting in Vienna, as per the usual. The members of OPEC looked around at the various oil markets. What did they see?
U.S. production has halted because it doesn’t pay to operate at a loss. Many companies are either already bankrupt or teetering on the edge. Many other companies have laid off everyone except someone to answer the phones. Canada looks very similar.
Russia’s economy has taken a huge hit because it can’t sell the oil it depends on for more than it cost to produce the oil.
What was OPEC’s response? To keep oil production at its current levels.
There will be no relief for any of these nations.
I suppose the upside is the effect it will have on Iran’s oil production and economy. But my melancholy over the effect it is having on our pocketbook far outweighs any happy thoughts I may have about Iran not being able to finance its nuclear program. I seriously have to get more writing gigs, like now.
There is an article on CNN that says it all pretty well. Check it out if you are interested: