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Effects of Plunging Oil Prices

Over the past year, oil prices have taken a nosedive, bringing many unintended side-effects along with it. A barrel of oil now costs just $48, less than half of what is was in the summer of 2014. This plummet has affected a variety of industries other than its own, and like every situation, there are both winners and losers.

The obvious winners in this situation are drivers. Since gasoline is derived directly from crude oil, the price of gas will rise and fall in conjunction with the price of oil. In fact, the price of gas is at its lowest in eight years. Homeowners that use heating oil to warm their homes are also great beneficiaries at the moment. Although fewer than 15% of Americans use heating oil, many people in the Northeast rely on it. Over half of the residents in Connecticut, New Hampshire, and Vermont–and over 80% of Maine residents–use gas. The lucky few who fall into both categories are definitely happy, but the ones on the other end of the spectrum feel quite the opposite.

The big losers with the drop in oil prices are countries economically reliant on the export of oil. Nations such as Russia and Brazil have taken huge economic hits with one of their main financial providers being rendered worthless. Also, over 40 North American companies have filed for bankruptcy, leaving thousands unemployed. Chevron Corp., for example, recently announced its first quarterly loss since 2002 and will be laying off 4,000 people this year on top of the 3,200 employees who lost their jobs in 2015. For people included in these categories, they can only hope oil prices will soon rise again.

It doesn’t seem as though the oil market will break out of its tailspin anytime soon. Not only is this dangerous slump producing historically low gas prices, but it is also destroying economies and causing high levels of unemployment.


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