Okay, that title might be a bit melodramatic. But, right now, at this moment in time, it doesn’t feel melodramatic.
The nation-wide phenomenon known as cheap gas is something we haven’t seen since well before my little Eva (she’s six and a half now) was even conceived. I wrote in her baby book that gas prices at the time of her birth were hovering around the $4.00/gallon mark. Now, as I pass the local gas station, the sign out front declares that gas is now $1.67/gallon. I can fill up my car for less than $20.00. I should be doing a little dance and rejoicing, right? So, what’s my problem then?
These lower prices are dramatically impacting my husband’s sales. Most of his income (which is most of our income) is commission based. He sells steel of all kinds, but some of his biggest customers are those in the gas and oil industry. The companies in the gas and oil industry are scared, though. The companies that have completely halted all projects are operating at a loss right now because of the price of a barrel of oil is so low. These companies are struggling to keep their current employees paid; they don’t have the cash flow to expand and work on new projects. So, what’s making gas and oil so cheap, you say?
The Organization of the Petroleum Exporting Countries (or as most of us know them, OPEC) is selling crude oil for next to nothing. Typically, if the prices for crude oil drop, OPEC decreases output which raises demand because of a drop in availability which raises the price. This time, though, OPEC is playing for keeps.
In an effort to become less reliant on foreign oil (silly Americans that we are like our independence), American oil production is up. The U.S. has been drilling for shale oil for several years now, significantly increasing production in the last couple of years. Russia has been doing its own drilling for years now, but Russia’s oil production alone wasn’t enough previously to impact OPEC. Now, with both the U.S. and Russia drilling and the overall global demand for oil on the decline (thank you hybrid and fuel-efficient vehicle drivers everywhere, and I genuinely mean that), the price of oil is dropping. As I said before, the typical answer to sliding oil prices is a decrease in output or sales by OPEC.
This time, OPEC doesn’t plan on decreasing anything. The members of OPEC met in November and declared to the world that production levels will not be changing anytime soon. This was reiterated again just a few days ago in a statement released by an OPEC representative. The next planned meeting between OPEC members isn’t until June.
The way things are looking right now, my husband may not sell enough steel for us to survive March. Did I mention my baby is due in March? Cue panic.
Even if I went back to work at a regular, reliable day job, it won’t do us much good when we need the income the most–March. Cue more panic.
I realize that we still have plenty of time to (hopefully) supplement our income with my writing and my husband’s constant efforts to find new customers. I realize that a lot can change between now and then. I realize that I should be praying about it instead of blogging about it (which I will be doing this evening, for sure). I know all of these things intellectually. But, emotionally–well, my emotions just don’t want to talk about it right now. Emotions have decided to turn a blind eye to reason for a few moments.
I thought at first when gas prices started dropping that it was a result of shale drilling in the U.S. and maybe a hidden-agenda by our government. Call me a conspiracy theorist, but I thought it was possible we (the U.S.) were flooding the market with oil in an effort to dry up some of the money that may or may not be funneled on a regular basis to terrorist organizations. I know, conspiracy theory is alive in my house. Now, however, I have a new theory. Yes, another conspiracy theory is about to develop before your very eyes.
I wonder that OPEC isn’t purposely allowing the price drop as a way to knock the competition out of business. Many of these companies in the U.S. drilling shale oil are mostly new businesses, and these companies are probably still paying back start-up loans. What better way is there to ensure a monopoly of the market than to get rid of all the competition? If OPEC forces these companies in the U.S. into bankruptcy, then we are right back to getting most of our oil from OPEC.
OPEC can withstand a long period of low prices because they have been operating at such a profit for so many years. Any loss sustained this year is just a drop in the bucket for them.
I cringe knowing that the failure of these companies won’t only affect my bank account, but it might affect my bank. It will affect the family of each employee as well. What we don’t need right now is the loss of more jobs.
I’m not entirely sure I’m being fair to OPEC, but I don’t really care, either. Whatever geopolitical nonsense is happening here, everyone needs to knock it off and play nice so I am not worried about bills in the middle of labor. I don’t want to be cataloging each bill that needs paid as I try to breathe through a contraction. Yes, I know, that is my personal problem, not the problem of the world at large. But, enough is enough. Come on now!
If you would like to read about it from a point of view not quite so slanted, try Googling low gas prices, or take a look at this article from CNBC.