Oil has grown cheaper this year, and with it a small mercy has arrived for ordinary people who fill their tanks and pay for the rising cost of living. Yet the same falling price is quietly closing the door on the wells and crews that made America the world's largest producer of crude. It is an old human pattern: what eases one household's burden can tighten another's livelihood, and the balance between them will be decided by how long the low price holds.
Cheaper Oil Eases Pain at the Pump but Squeezes U.S. Drillers, Who Are Idling Rigs and Cutting Jobs
Thousands of oil industry workers have been shed as companies cut jobs, including major cuts at Chevron and ConocoPhillips.
Cheap oil is still good news, just much less than it used to be.
Mark
Cheaper gas sounds like good news. Why is this a story about pain?
Mimi
Because the same price that saves a driver a few cents hurts the people who produce the oil. Rigs drilling for oil are down about 13 percent from a year ago, and oil and gas employment fell 3 percent through July.
Mark
How much are drivers actually saving?
Mimi
Not a lot. Regular gas is $3.07 a gallon versus $3.16 a year ago, about 3 percent.
Luke
That's worth noting. Crude is down about 18 percent since the end of last year, but pump prices are only down 3 percent from a year ago. Those are different timeframes, so they aren't a clean comparison.
Mark
Why does the U.S. feel this differently than it once did?
Mimi
It's now the world's top oil producer. Moody's Chris Lafakis says falling prices are still a positive, just much less than before. States like Texas and North Dakota depend on those employers and taxpayers.
Mark
And the tariffs?
Mimi
Steel pipe for wells cost 17 percent more in September than a year earlier, per J.P. Morgan analysts. Liberty's Ron Gusek says every dollar matters right now.
Luke
Gusek is an industry executive, so that's his view of tariffs. The pipe figure is an analyst estimate. And the job losses at Chevron and ConocoPhillips came before the dip below $60, so prices aren't the only cause.
Mark
So what's the real forecast?
Mimi
Dallas Fed economist Jesse Thompson says more layoffs are likely if prices stay below $60 through year-end.
Luke
Which is conditional. Prices bounced toward $60 on talk of Russia sanctions, so how long they stay low is still unknown.
El Pulso
- US crude has slid below $59 a barrel, roughly 18 percent lower than at the start of the year, and the drop is being felt at pumps and in boardrooms alike.
- Drillers are idling rigs, with about 13 percent fewer working than a year ago, as producers judge that new wells no longer pay at this price.
- Chevron, ConocoPhillips and others have cut thousands of jobs, and oil and gas employment already fell 3 percent through July.
- Tariffs on steel pipe have pushed costs higher, leaving executives squeezed between falling revenue and rising expenses.
- If prices stay under $60 through year-end, economists expect more layoffs and spending cuts, straining the administration's push to expand domestic output.
Oil has grown cheaper this year, and with it a small mercy has arrived for ordinary people who fill their tanks and pay for the rising cost of living. Yet the same falling price is quietly closing the door on the wells and crews that made America the world's largest producer of crude. It is an old human pattern: what eases one household's burden can tighten another's livelihood, and the balance between them will be decided by how long the low price holds.
On Wednesday, U.S. crude settled below $59 a barrel, about 18 percent under where it began the year. For drivers, that is welcome relief: regular gasoline averages $3.07 a gallon, slightly cheaper than a year ago, at a time when food, cars and electricity cost more. For the companies that pull oil from the ground, the same number has become a reason to stop drilling.
The cause is a global surplus. Production from the United States and from OPEC Plus, led by Saudi Arabia, has grown faster than demand, and trade tensions have dimmed hopes for economic growth. A cease-fire between Israel and Hamas also eased fears of supply disruption, pushing prices lower still.
The strain is already visible. Rig counts have fallen about 13 percent, and Chevron, ConocoPhillips and others have announced deep job cuts. Executives say the record output of this summer is nearly over, and a fracking chief warned that current production would be hard to sustain. Tariffs on steel pipe add to the burden.
Some cushion remains, since higher natural gas prices soften the blow, and cheaper fuel still helps the broader economy, though less than it once did. But the outcome depends on time. If prices stay below $60 through the end of the year, economists expect more layoffs and cuts, and the administration's goal of expanding domestic oil may slip out of reach.
On Wednesday, U.S. crude oil settled at less than $59 a barrel, roughly 18 percent below where it stood at the end of last year. For drivers, that is welcome news. For the companies that pull oil out of the ground, it has become a reason to stop drilling.
The main cause is simple: global oil production has been growing faster than demand. The United States is pumping more, and the OPEC Plus group of producers, led by Saudi Arabia, has been ramping up output too. Analysts have worried all year that the world was producing more than it needed. This month brought two more pushes downward. Israel and Hamas agreed to a cease-fire, easing fears that conflict in the Middle East would disrupt supply. And heightened trade tensions have weighed on expectations for global economic growth, and with them, demand for fuel. Prices crept back toward $60 late Wednesday after Treasury Secretary Scott Bessent said the United States planned new sanctions on Russia.
Oil is one of the few things that have gotten cheaper this year. Food, cars and electricity cost more, and hiring has cooled, so lower fuel prices are a rare piece of good news on inflation. Regular gasoline now averages $3.07 a gallon, according to AAA, about 3 percent below the $3.16 of a year ago. Energy prices were a major theme of the 2024 presidential campaign, and President Trump has urged Saudi Arabia and other big producers to help push prices down.
But that goal runs against another one: the administration wants to greatly expand domestic oil production. For much of the year, oil hovered between $60 and $70 a barrel, lower than many companies would like but not low enough to dent output. U.S. production hit a record 13.6 million barrels a day in July, according to the Energy Information Administration. Oil executives say that run is nearly over. At under $59, it no longer makes financial sense for many companies to drill new wells. Ron Gusek, chief executive of the fracking company Liberty Energy, said activity has fallen to a level at which it would be very difficult to sustain current production.
The numbers already show the strain. According to Baker Hughes, an oil field service company, about 13 percent fewer rigs are drilling for oil than a year ago. Chevron, ConocoPhillips and other companies announced deep job cuts even before prices dropped below $60. Employment in oil and gas production and related services was down 3 percent through July this year, according to the Bureau of Labor Statistics. Falling prices have also cut into profits, which are retreating from the very high levels of recent years and adding pressure on executives to trim spending.
Some cushion exists. Natural gas, which often comes out of the ground alongside oil, has fetched higher prices, softening the blow. Chris Lafakis, director of economic research at Moody's Analytics, said cheaper oil is still a positive for the U.S. economy, but much less than it used to be. That reflects the country's shift to being the world's top oil producer, and a more energy-efficient one. Cheap fuel now hurts big employers and taxpayers in states like Texas and North Dakota.
Tariffs are compounding the problem. Steel pipe used to line oil wells cost 17 percent more in September than a year earlier, J.P. Morgan analysts wrote in a note to investors. Mr. Gusek, whose predecessor at Liberty, Chris Wright, is now Mr. Trump's energy secretary, said tariffs do not bring manufacturing back in the near term; they only make life more expensive, and in a difficult operating environment every dollar matters.
What happens next depends on how long prices stay low. Jesse Thompson, an economist at the Federal Reserve Bank of Dallas, said last week that the lower price has to stick around a while to really hit the oil field. If crude stays below $60 through the end of the year, he said, more layoffs and spending cuts are likely. Many analysts think prices could stay there or fall further.
Citas Notables
Activity level has now fallen to a place where it would be very difficult to sustain current production.— Ron Gusek, chief executive of Liberty Energy
The lower price has to stick around a while for it to really hit the oil field.— Jesse Thompson, economist, Federal Reserve Bank of Dallas
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