It wasn’t that long ago that the people of the United States saw the beginning of what appeared to be the massive decline of the oil industry. In 2015, crude oil prices dropped immensely as 40 publicly-traded American oil companies collectively lost over $67 billion, according to Energy Information Administration data.
If you’re like a majority of Americans who have no stake in the oil industry, this isn’t terrible news for you. In fact, you’re probably excited about the prospects of cheaper gas prices. It was predicted that the average consumer saved over $300 at the gas pump in 2016 and would save even more on the costs of heating their homes.
If you’re part of the energy industry, things aren’t looking so great at the moment. In 2015 alone, at least 67 U.S. oil companies filed for bankruptcy, a 380% increase when compared to the previous year. Unfortunately, this also means that massive layoffs took place, as these companies had to say farewell to over 130,000 jobs.
This also spells potential disaster for the banking institutions who have extended huge lines of credit to these failing oil companies. Some of which have already begun to affect the stock market and United States economy.
"It seems those companies that were most highly leveraged were also the ones taking the riskiest bets. That's what has come back to hurt them the most," said director of commodity research at ClipperData, Matt Smith.
However, banks and financial institutions can use the process of “redetermination” to basically decrease or even retract all lines of credit previously issued to oil companies, saving themselves from fallout should these companies fail.
Perhaps the biggest oversight by the American people during times when oil is cheap is the fact that we tend to consume more of it and care less about the effects of our consumption. After all, who needs a low-emission, gas-saving vehicle when you can afford the gas required for the bigger, not-so-eco-friendly luxury vehicles?
It is important for us to remember that different groups of people all over the world will be affected by the changing climate of the energy industry over the coming years. Oil exporting countries will have to adapt to survive in a new environment. And the common people, when faced with cheaper gas prices, will have to remain vigilant in the fight for clean energy.
Things are about to start changing. The best we can do is pay attention and make the right choices when the time comes.