WASHINGTON (Reuters) – A plunge in energy prices is hitting America’s oil and gas producers, leading some firms to lay off workers while others struggle to get loans, the Federal Reserve said on Wednesday.
A wide range of policymakers, investors and economists think cheaper oil overall will benefit the US economy, principally by letting households spend more money on other things.
The Fed’s monthly Beige Book report on business activity had some evidence of this economic boost, with firms telling the Fed that lower gasoline prices helped holiday sales in the Chicago district and led people to buy bigger cars in the Atlanta district.
But the Fed also gave a litany of examples of the pain that has come with the more than 50 per cent drop in oil prices since mid-June.
Compared to a month earlier, oil and gas exploration decreased in North Dakota, the state that has been central in America’s energy industry transformation.
In the Fed’s Kansas City district, which includes big energy producers like Oklahoma, firms were projecting “significantly lower” drilling activity, employment, and capital expenditures.
In the Dallas Fed district, which includes Texas, northern Louisiana and southern New Mexico, growth in business activity slowed, with several contacts expressing “concern about the effect of lower oil prices.”