High oil prices can help businesses whose products and services benefit the oil & gas industry.
Businesses like manufacturing, construction, energy services and equipment supply.
On the other hand, high oil prices lead to high fuel prices like gasoline. This negatively affects all businesses and states with higher fuel and freight costs.
Types of Businesses that Benefit
High oil prices usually spur more activity in the oil patch. This means extremely large companies like Exxon, Chevron, Schlumberger (SLB) and Halliburton may increase production and investments in equipment. Some of this investment can make its way to small businesses.
Small businesses like oil field services and pipeline construction may benefit. Others like machine shops and metal fabrication shops may benefit from manufacturing oil & gas equipment.
Related: Is Renewable Energy Replacing Oil?
Impact on State Budgets
The impact can be positive on oil-producing states while negative for non-oil-producing states according to the Tax Policy Center. Oil-producing states may apply a severance tax at the wellhead and receive revenues from each barrel of oil produced. Oil-producing states include Texas, Oklahoma, Alaska, Louisiana, North Dakota, West Virginia, New Mexico and Montana.
For other states, the impact can be negative because of high fuel prices and a general slowdown in economic activities like retail spending. High oil prices may lead to inflation which can increase the costs of construction, roads and bridges.
High oil prices can help some businesses and states. However, many businesses and states are negatively affected.
About C&C Machine
We are a precision CNC shop in Oklahoma. We manufacture custom components for the oil & gas industry among other industries.
