why is decreasing gas price a bad sign for the economy?
In: Economics
In areas where much of the economy is based around oil production companies will begin laying workers off. When the price of oil is lower than what it costs to produce companies begin shutting down production. As production slows less crews are necessary and layoffs begin.
This has an impact upon the economy, when oil prices are high, oil companies hire and pay very well for very hard labor. The guys that work these jobs like nice big diesel trucks, and have nice homes, and kids. Or they drink really heavy and blow it all. Either way, that money goes back into the economy. This all stops with a layoff.
Now the government is paying money to that laid off employee to try to help cover expenses, so even though he is spending, it is still netting a negative, as the taxes being paid and money being used is simply the governments money circling.
This is a massive amount of people that are at risk. The U.S. oil industry employs roughly 9.8 million people, roughly. Kern County, with a city of half a million people in it has a massive oilfield, when people are laid off everything else falls with it, in many senses.
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