Dallas Fed Cautions About Impact of Falling Oil Demand on US Economy
Capital spending by energy companies in the US has reduced as a result of the ongoing coronavirus pandemic and could fall by at least 30%
According to estimates by the Dallas Fed, capital spending by energy companies in the US has reduced as a result of the ongoing coronavirus pandemic and could fall by at least another 30%, which could have a severe impact on the country’s economy in the coming months. As a result of the shutdowns, oil demand had declined by as much as 30%, causing a crash in US oil prices during March and April.
However, consumers have been unable to make the most of falling oil prices as demand remains subdued due to the continued shutdown conditions. As a result, the drastic fall in oil prices and oil demand has forced US energy companies to resort to curtailing their spending plans and reducing production.
In its article, the Dallas Fed observes, “The sharp reduction in capital expenditures by oil companies explains why this oil price decline, on balance, actually hurt U.S. investment spending – and hence, economic growth – not only in oil-producing regions, but overall.”
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