Rock bottom oil prices have been a boon for drivers.
But for states dependent on the oil industry, it’s an unfolding economic disaster.
Here’s a graphic warning about undue reliance on a single industry. It was part of an email analysis emailed to clients of Charles Schwab.
The graph, distributed shows the percentage of state tax revenues from oil and gas production in 2015. These are known as severance taxes. It shows that two states, Alaska and North Dakota, get more than half of their tax revenues from taxes on oil and gas.
I suppose that’s great, at least for state budgets if not for the global climate, during periods of oil boom.
But during an oil bust, like today, it’s likely to be bad news as those oil and gas revenues slump.
The resulting economic pain is obvious. Unemployment is now high in many of these areas.
Schwab warns that smaller counties or cities in the oil dependent states could have trouble keeping up interest payments on their municipal bonds, increasing the risk of defaults that could ripple through the economy.
And I’n wondering about the political impact of this kind of meltdown during the presidential campaign. Economic pain is a potent source of political motivation that candidates will be trying to harness.
Anyway, more to think about.
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Well, when oil prices were bursting at the seams, folks in our little state took the brunt of it with the highest gasoline prices in the nation to fuel our cars and increased the costs of doing business, much of it directly passed on to consumers. In turn, the rising cost of jet fuel curtailed the number of tourists coming here, which caused many working in the visitor industry to take home fewer dollars. So,… pardon me if I don’t appear sympathetic enough to those cities and communities detrimentally affected by lower oil prices, when I give them the lecture that has been given to us in Hawaii time and time again.
“Diversify, diversify, diversify.”
Cause and effect: Amtrak’s president, Joe Boardman, has demanded a 3.8 percent cut from all departments across the board. Ridership and thus revenue is down because, with lower gasoline prices, people are driving instead of taking the train. Cause and NO effect: with jet fuel costing a third of what it did 18 months ago, as far as I can tell, the airlines haven’t reduced fares and are still adding on a surcharge to cover “the high cost of jet fuel.”
@Jim Loomis:
The article below belies your claim.
http://www.telegraph.co.uk/travel/news/Air-fares-became-cheaper-across-the-world-this-year/
Allen N., perhaps you don’t fly very often?
Year before last my trip to the east coast cost just under $700.
Last year the same trip was $1100.
This year? Guaranteed it will be well over a thousand dollars.
Then there’s those “oh so affordable” interisland jaunts. Have you traveled interisland lately?
@Jim Loomis: You offer personal anecdotes and experiences. And that’s fine.
I’ll use articles that cite industry wide trends and statistics to make make my points.
And to everybody, have a great President’s Day weekend.
Allen N. the article you referenced ended thusly: “On the other hand, it appeared that there had been slight rises in fares to North America and the Caribbean.” Perhaps overall fare trends are down but not to and within the mostly unregulated USA.
Since we’re talking about travel to Hawaii specifically,…
http://www.bizjournals.com/pacific/news/2015/04/20/summer-airfares-to-hawaii-drop-airlines-reporting.html
“The cost of airfare to and from Hawaii destinations during the summer months has been falling, while fares to other U.S. cities have remained relatively flat, according to a study by Airlines Reporting Corp., which provides business services to travel agencies.”
“The drop in prices may be due to dropping fuel prices, but Hawaii also has more total seats coming to the Islands.”
Is that still not “cause and effect” enough for some people?
Here is an article on ‘peak oil’ production (declining oil production).
By 2022, there will may be no more fracking, and conventional oil production and exports are expected to decline in majors like Saudi Arabia.
That does not necessarily mean that there will be a global economic crisis because the world has been moving away from oil since the 1970s, a trend in declining consumption that has been accelerating (‘peak’ oil consumption).
http://www.greentechmedia.com/articles/read/what-happened-to-peak-oil
The one exception is air travel, which relies on kerosene from petroleum, for which there is not yet an alternative.
This is very relevant to Hawaii.