Cheap crude has hammered oil producing states to the point that they’re dragging down overall economic growth in the U.S. and erasing any positive effects from falling commodity prices, Goldman Sachs says in a report this week.
As FuelFix.com reports, while the dive in crude oil prices from more than $100 in June last year to a little over $50 this month has meant the cheapest gasoline prices since 2009, consumer spending from that windfall hasn’t outpaced deep cuts to the oil and gas sector.
The researchers note says that slumping oil prices have meant dramatic declines in oilfield investments—fewer new wells are being drilled, and companies are slowing their purchases of drilling equipment. That led to the industry sapping about half a percentage point from U.S. GDP growth in the first half of 2015.
Oil producing states, including Texas, North Dakota, Oklahoma, New Mexico and Wyoming, are feeling the spillover effects from the industry slowdown in the rest of their economies, the report says. Non-mining employment growth in these states has fallen from 48,000 per month in the last three months of 2014 to just 4,000 per month from February to March 2015.
Total manufacturing growth has also taken a hit, with industries like construction equipment and iron and steel production feeling the effects of fewer orders from oil and gas drillers.
But Goldman Sachs also notes that the shock of the oil price collapse on the energy industry appears to lessening. The steep drawdowns in rigs reported by oil field services firm Baker Hughes for the last six months have started to level out, with double-digit losses since December being replaced by a tiny uptick in this month.
