Lower oil prices are on balance clearly good for the United States — putting money in the pockets of the beleaguered middle class — but of course in Colorado the picture is more complicated.
As Denver Post , “Oil and gas severance taxes totaled $318.9 million in the past 12 months through October in Colorado, more than four times the amount collected in late 2009, when prices were last depressed.” So severance taxes could sink if companies pull back significantly on drilling and production, and that’s only the beginning of the impact.
Colorado’s economy has gotten a major boost from the Niobrara energy rush, with many good-paying jobs and their ripple effects. Some of these could be in jeopardy as well if oil prices take another big dip.
But that is true for several other states, too: Not only has the oil and gas industry overall “added more than 135,000 high-paying jobs from 2007 to 2012,” , but “the boom is being felt well beyond the energy sector.”
Still, how can anyone argue with markets working as they’re supposed to? The shale energy revolution has not only reinvigorated U.S. production, it’s also put downward pressure on world markets — so much so that some analysts speculate that Saudi Arabia may be deliberately trying to undermine U.S. drilling by holding its own production at high levels.
Not even Saudi Arabia can push the shale genie back into the bottle, though. Given worldwide production and slack demand, oil prices could remain for years well below the $100-a-barrel threshold they were back in June, according to some estimates.
And it won’t only be consumers and manufacturers who will benefit. U.S. foreign policy may be strengthened if petrostates such as Russia and Iran find themselves under growing financial constraints. And as former State Department official Robert Manning pointed out recently, falling oil prices could also push “Venezuela’s horrendously mismanaged socialist regime” to make changes.
There are winners and losers whenever prices shift in an important economic sector. But as Manning argues, in this case the U.S. would appear to be “largely a winner.”
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