Falling Oil Prices Affecting Business Investments


Published Date : Mar 23, 2015

The declining oil prices are exhibiting a major impact on the global energy industry, in the form of cut backs. This industry was in fact, doing quite well as against the other industries that were not doing too well because of the unsatisfactory growth of the U.S. economy. Last year, expenditure on business capital had risen by 6% because of the broad base of industries in the United States. As per economists working at Goldman Sachs, by 2015, it is anticipated that this fall in the energy sector could lead to growth cuts. 

Furthermore, equity analysts of the company also stated that the global capital spending carried out by energy companies included within S&P 500 will witness a decline by almost 25%. This will lead to a major annual fall in total capital investments of the major businesses in majority of the sectors since the year 2009. Several S&P 500 energy firms have declared spending cuts worth US$8.3 billion. The cutbacks on energy show up at a time manufacturers and exporters witness headwinds arising from a strong dollar. This, in fact makes the U.S. goods more expensive in other countries. 

With falling oil prices, the United States still manages to emerge a winner. Those consumers who are in a position to spend greater amounts at restaurants and retailers are generally the ones who spend minimally on gasoline. There are many companies that benefit substantially because of low material costs. However, major cuts in capital investments on energy production highlights the way in which an economy gets transformed due to a boom in domestic energy production that have a significant impact on the industrial sector at a time of economic expansion.