Plunging Oil Prices Could Hurt US Economy

Plunging Oil Prices Could  Hurt US EconomyPlunging Oil Prices Could  Hurt US Economy

In just the last three months, oil prices have fallen by 40% to their lowest levels since the financial panic of 2008-2009. Citigroup estimates this might provide the global economy with the equivalent of more than $1.1 trillion in stimulus.

However, while the benefit to consumers is apparent at the pump, the potential threats caused by the pace and severity of the decline might not be. Let's explore two ways that rapidly falling oil prices might actually be a drain on the economy in the long term, The Motley Fool reported Sunday.

The US shale boom has been a major growth catalyst for domestic job creation, much larger than the rest of the economy.

According to Investor's Business Daily, "Employment is up 40% in the oil and gas fields since the recession began in late 2007. But in every one of the 10 states where hydrocarbon production is on the rise, overall employment growth has outperformed the nation." In addition, US shale oil has attracted massive amounts of foreign investment, with 100 factories that will produce oil and gas infrastructure such as pipelines, servicing equipment, and drilling rigs, scheduled to open over the next two years. This is projected to boost the nation's economy by $300 billion and create an additional 1 million jobs. At least that was the plan before the bottom fell out of the oil market.

According to the Norwegian energy consulting firm Rystad Energy, the oil crash is likely to result in the delay or cancellation of over $150 billion worth of oil and gas projects around the world.  In total, 800 oil and gas projects worth $500 billion targeting 60 billion barrels of oil and oil equivalent might be cancelled or delayed if oil goes lower or stays suppressed throughout 2015.