Anyone who drives a car or truck that isn’t a plug-in electric benefits from cheaper oil every time they pull up to the gas pump. But for manufacturers, the benefits are far more unevenly distributed.
Consider tiremakers and steel plants. Both use lots of petroleum-derived raw materials and are already counting big savings from this year’s rapid fall in oil prices. U.S. oil prices continued to swoon on Thursday, nearing $60 a barrel for the first time in five years. The slide is driven by a glut of supply that’s expected to endure well into next year.
Cheaper oil is usually good for the economy—and for domestic manufacturers. But not everyone gets the same boost and some are outright burned when oil falls.
For those who don’t use much oil, such as apparel or computer makers, the benefits are more muted. And at the other extreme are producers of the valves, pipes and other equipment used to explore and process oil, who are feeling the squeeze as customers cut back investments.
To be sure, the global economy and its manufacturers aren’t as dependent on oil as they used to be. Oil consumption by the 34 members of the OECD in 2013 was roughly equal to its 1996 level. But real GDP for the group was 40% higher. A recent report by UBS notes that means it “takes almost 30% less oil to produce a dollar of OECD GDP today than was the case in 1996, and all things being equal this means that the economic impact of an oil price change today is 30% less than was the case in 1996.”
There’s also a geographical dimension to oil’s uneven impact. Take Gary, Ind. According to an analysis by Moody’s Analytics economist Chris Lafakis, Gary’s factory sector—dominated by oil-guzzling steel and related operations—uses 15 times more petroleum as a percentage of the metro area’s GDP than the nation’s average.
“My sense is that the areas that benefit the most have a lot of steel and metal-working,” Mr. Lafakis says.
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