Low gas prices aid motorists, hurt oil-producing states like Kansas

Gasoline prices are at their lowest levels in seven years. That’s pretty good news for motorists in the Kansas City area and throughout the nation during the holiday season.

Then again, tell that to the tens of thousands of Americans who have lost their jobs in the now-beleaguered petroleum industry states, including in Kansas.

Fuel costs are hovering around $1.70 a gallon on the Missouri side of the state line and are almost a dime higher in Kansas. The national average is about $2 a gallon, or close to what Americans were paying this time in 2008.

Crude oil prices also have dipped and are near where they were about a decade ago when inflation is taken into account.

The slide comes on the heels of a long trend of increased employment and petroleum production in the United States. As energy experts often point out, this is a classic boom and bust industry. Don’t expect many Americans to cry crocodile tears for the Exxons of the world; they have recorded large profits in recent years.

Part of the positive story about petroleum in recent years is that the United States has become the world’s largest oil producer, as 2014 figures showed. Part of the gains have come from controversial and environmentally risky fracking — using water to extract oil and natural gas from shale — in Kansas and other states.

But as U.S. production has gone up, and the Organization of Petroleum Exporting Countries has refused to slash what it pumps, the world’s consumption has not kept pace. That’s in large part because of the now-lukewarm Chinese economy. Thus, the oil glut and falling prices.

So what does the future hold?

Many experts aren’t optimistic — and that’s bad news particularly for Kansas. Gov. Sam Brownback has pointed to the loss of millions of dollars in severance tax revenues on oil and gas production as one reason the state is having trouble balancing its budget. He’s right to be worried, though the excessive income tax cuts he pushed through in 2012 are doing far more damage to the budget.

Nationally, if the slump in petroleum prices lasts, it could continue to push down the values of U.S. energy stocks and eventually force dramatic reductions in production of oil that’s too costly to get out of the ground. That turn of events could give more power over the world’s oil markets back to OPEC. Shades of the 1980s.

The only sure thing about the current bust in the oil industry is that it won’t last. Stronger economies in the United States, Europe and China could propel greater demand. More tension and uncertainty in the Middle East could do the trick, too.

Americans should enjoy the current low cost of fuel while they can can. Sure, it might go even lower — or race back up to near the $4 a gallon mark it has reached occasionally in the last three years.

This story was originally published December 18, 2015 at 9:00 AM with the headline "Low gas prices aid motorists, hurt oil-producing states like Kansas."