A story in our local paper talks about the problems of West Texas. This area, the center of the Texas oil industry, is suffering. People are being laid off from the oil fields, because drilling has, as it were, dried up.
No surprise: With the price of oil below $40, and with drilling a supply response to shocks that raise oil prices, it is no longer so profitable to drill new wells — suppliers have moved down along the supply curve.
With that decline, the demand curve for labor, which is derived from the market for oil, has shifted leftward.
I feel sorry for the laid-off oil workers, my fellow Texans and Americans; but the decline in oil prices has also hurt some of my least favorite people — the Saudis and Messrs. Putin and Chavez — so my tears are fairly limited. Also, as with any decline in product price, consumers gain. As usual, a few lose a lot, while each of the many gains a little.
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In response to EJ: There’s also the payoff:
cheaper gas= more driving, more greenhouse gases but less drilling in sensitive areas
From what I see on my daily commute, people are not driving more because gas is cheaper. On the contrary, they are driving less because they have lost their jobs. On top of that, companies are shipping less because they are manufacturing less because demand for the products is down because people have lost jobs/income.
Greenhouse gases = people have jobs and the economy is growing
#7 – Isn’t part of the reason we’re in a recession due to people trying to over-consume (i.e. buy houses with terrible loans that were beyond their means to pay off)?
#9 – Why can’t the economy grow and people have jobs while keeping greenhouse gases stagnant or even reducing them? Your equation doesn’t hold.
Re: “Greenhouse gases = people have jobs and the economy is growing”
Sure, but what good is all the money (and work) in the world if you can’t breathe the air, drink the water, get food from the soil, etc? That’s such a narrow view of prosperity that people have when they don’t consider the big picture.
The same people who are losing money now on the decline of oil prices, were profiting outrageously when it was around $150 a barrel. Pardon me if I don’t weep for profiteers.
I find it offensive that someone can arbitrarily say (on a widely read blog) that the Saudis and Vladimir Putin are some of their least favorite people without providing any documentary justification. (I can forgive him for including Chavez in that group, since Chavez is known to be a thug).
Because, Bush’s hands are far bloodier than Putin’s. Putin’s bellicosity is just a reaction to the corner that the American missile defense system has pushed him into. And the Saudis! What’s wrong with them? How many wars have they started? Zilch. The only issue you can find with them is that of women’s rights. But then, you are up against an entire religion.
It is more disappointing to google Daniel Hamermesh’s name and find that he is actually a professor at UTexas. If the smartest of the smart fall prey to irrational propaganda, then there’s little hope for peace on earth.
Henceforth, I shall maintain that Daniel Hamermesh is one of my least favorite people for this very reason.
It seems to me that lowering of gas prices is really just a matter of borrowing from future generations. The longer we take to wean ourselves off of fossil fuels and foreign energy sources, the more painful the crash is going to be. I think the moral thing to do is to take our lumps now, not pass them on to our kids and grandkids. Prohibitively high gas prices are going to hurt like the dickins now, but in the long view (100 years, say), the sooner we do it, the better.
Daniel my boy,
You seem to take an odd side on these issues. Perhaps time has pasted you by. The “Saudis and Messrs. Putin and Chavez” have wealth, so a decline in income will barley affect them. As to the plastic water bottles, Sigg water bottles are a superior substitute (http://www.mysigg.com/) and do you tap water. Maybe this was the intent. And your Pareto Optimal example was just lame. Time to move and and stop trying to be cute.
It is worth objecting to the final, orthodox “As usual, a few lose alot, while each of the many gains a little.” Doesn’t the housing and banking debacle demonstrate the opposite?