In the Wall Street Journal article written by Josh Mitchell, the topic discussed is the concern over the unemployment rate in states that are main energy suppliers of the nation. Currently, energy prices and oil are at all time lows since there is a huge supply of oil coming from middle eastern nations (OPEC) that can pump out the resources at very little costs to them. Due to the laws of supply and demand, this drives out competitors since the costs of production are not as cheap for countries elsewhere or even states more local in the US. It seems like these middle eastern nations want to create more of a monopoly over this resource through the over production even if it means driving the cost down.
As in economics, there are costs and benefits to these actions. Although most American consumers are loving the cheap gas prices, states that profit from drilling are not so happy about the current state of affairs. For instance, the article mentions that according to the Bureau of Labor Statistics, states that are primarily oil oriented are experiencing increasing unemployment by around 1/10 of a percentage. In all, the overall unemployment rate is around 4.9% which is below the natural rate which means we are in a tight labor market and the economy is doing generally well, but for energy driven states like Wyoming, Illinois, Kentucky, and Alaska for example, this is a slightly different story. This will be an interesting story to follow, and I wonder how the rates will change over this coming year.
Article link: http://blogs.wsj.com/economics/2016/03/14/joblessness-is-falling-but-not-in-states-tied-to-energy/
I think that this article brings light to an interesting relationship in our economy. On one hand as consumers we love lower oil prices since it lowers our expenses on items such as gasoline. That being said, corporations that produce oil and its products do not like the low price since in many cases in America it is hurting their profits and causing them to lay off workers. I am curious to see if the American government or its domestic corporations have a plan to improve the job market in this sector or if they will just let the market play out over time. It will be interesting to see this play out on the international and domestic stages this year.
ReplyDeleteI agree with the comment above. Consumers love lower oil prices because it benefits them. However, they do not realize that this may be causing a lot of unemployment. I honestly believe that it is a vicious cycle. At some poing unemployment will decrease and oil prices will increase again. The government will not do anything about it and they will just let it play on its own.
ReplyDeleteI also agree. there is no way to make both parties happy is oil prices are low the oil companies hate it but the consumers that are buying gas loves the low prices. it will be interesting to see if when the prices of oil goes back up if the unemployment rate goes down and if so will it return to like it was before the price drop.
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