In the midst of the COVID-19 pandemic, the price of oil crashed. While this means some relief at the pump, it can also be devastating to some communities.
Gas prices are the cheapest they've been in four years. According to AAA, the national average is under $2 a gallon, and it's even lower in some parts of the country.
Despite a volatile market, with price swings up to 25 percent in a single day, the price of oil has crashed overall. That's down from around $60 per barrel in January to around $20 per barrel.
Severin Borenstein, director of the Energy Institute at UC Berkeley, has been studying energy prices for decades. He says those in oil country are sounding the alarm.
“There’s quite a bit of concern in the oil areas of the country, particularly parts of Texas, Oklahoma, parts of North Dakota, and New Mexico, and Colorado that the price is going to stay this low,” said Borenstein.
And there are only so many hits American producers can take before they got knocked down. Just ask Shawn Wenko.
“You’re seeing a one two punch with the industry," Wenko explained. "With the discussions between Saudi Arabia and Russia that started, in essence, a price war, somewhat. And then, I don’t think anyone planned for a global pandemic to come along and crash the entire global economy as well."
Wenko is the director of the economic development office for Williston, North Dakota, a town known for its oil. Communities like his are going to feel the pain of this price hit.
“It’s been very significant. I think we’re seeing a bit of a delayed reaction. I think we’re going to see it get much worse before it gets better,” said Wenko.
“It’s not just that the owners of the oil companies are worse off, it’s also the workers, and then it does trickle down to housing prices and auto sales and everybody is hurt,” said Borenstein.
And some oil-adjacent companies are worried about staying in business. Kevin Black works for Creedance Energy Services, a company that provides services to oil rigs. He wouldn’t speak to us on camera but said “the biggest risk is that if a price environment persists past a couple months it becomes impossible to be profitable.”
That’s because the cost of drilling oil out of the ground is so expensive, the price of oil needs to be at a certain level for producers to make a profit. At least one US oil producer has filed for bankruptcy because of it.
And that’s a huge threat the American oil industry, which has become vital to the American economy.
“The actions by Saudi Arabia and Russia, they knew exactly when to stick the pin into the balloon this time. And there actions really damaged a market for oil because they aren’t happy that the United States has taken 5 percent of the world oil market away from OPEC,” said Ron Ness, the president of the North Dakota Petroleum Council.
But the price dip will be good for American drivers, at least in the short-term.
“As the price stays down and people start driving again, that will be a net benefit for the economy. However, in the oil producing regions we are going to see a pretty massive macro-economic hit,” said Borenstein.
President Donald Trump says relief in terms of production cuts from the Saudis and Russians is on the way.
Until a change in the production or demand of oil occurs, American drivers will continue to reap the benefits at the pumps while oil country tries to weather the storm.