Two years ago the United States became the world’s largest petroleum producer due to oil extracted by fracking oil shale deposits. Monday, the oil fracking boom came to an end as petroleum prices plunged 30% when Russia and Saudi Arabia entered into a oil price war.
Crude lost as much as a third of its value this week after Friday's meeting between OPEC and its allies, including Russia, ended in acrimony and led to scrapping all restrictions on output in a market already awash with oil.
The price war is exacerbated by the developing coronavirus pandemic and the coming recession. The Trump administration wants to help the politically connected oil companies.
“White House officials are alarmed at the prospect that numerous shale companies, many of them deep in debt, could be driven out of business if the downturn in oil prices turns into a prolonged crisis for the industry.”
While lower oil prices would seemingly boost the world’s economy; it has very mixed economic and political affects domestically. All of which is vastly complicated by the pandemic.
The sudden plunge in oil prices means quick layoffs in the oil field which will soon spread to other areas.
The energy meltdown threatens to cause a repeat of the 2014-2016 oil crash that bankrupted dozens of American oil and gas companies and caused hundreds of thousands of layoffs. Although the industry survived, the experience proved to be very painful.
Cheaper petroleum and natural gas spells further doom for coal prices so more mines will close. Most coal producing regions have long been declining in population and will have less political clout after redistricting after 2021. This could especially be a problem for Trump in the key state of Pennsylvania.
While mostly positive for the environment, there is a downside. Low prices mean more fossil fuels will be consumed, and the growth of renewable energy will slow.