Falling Oil Prices and the Impact on US Manufacturing

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So far, the spring of 2015 has been an interesting chapter for United States oil prices and production. In some cases, the current bear market has been setting records that have remained unchanged for years. In short summary, U.S. oil production has recently reached some high peaks, pushing prices to levels that are lower they’ve been since the spring of 2009. Production and stockpiles of U.S. oil are on the rise, prices are continuing to drop, and the U.S. dollar is gaining strength. All three of these converging trends are having an impact on the U.S. economy in general, and specifically the manufacturing sector. Here are some of the highlights.

Easy Access to Energy

Low energy prices can help manufacturing enterprises cut costs and increase output when it comes to production, since machines and manufacturing facilities depend on high levels of energy for their daily operations. Low energy costs also mean lower fuel prices, so shipping, distribution, warehousing and delivery are also at record levels of affordability. This is promising news for businesses with high energy consumption levels and high usage of petroleum as a component for chemical mixtures or raw materials such as plastics.

Strong Dollar

As oil prices fall well below 100 per barrel (hovering between 40 and 50), and stockpiles come close to exceeding U.S. capacity for storage, the strength of the dollar is on the rise. This makes dollar-priced oil more expensive for countries with weaker currencies. In turn, the demand for exports of oil and oil based goods tends to drop. Slowing oil production in the U.S. will probably keep prices at higher and more stable levels, but it remains to be seen if this move will play a role in United States oil production decisions as we move forward through the remainder of the year.

Overproduction in U.S. markets, a weak global economy and a soaring dollar caused oil supplies to lose 60 percent of their value between June of last year and January. For more on how this information may impact your own manufacturing business, reach out to the industry experts at Career Staffing Services.

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