It’s estimated that more than a quarter of a million jobs have been lost worldwide due to collapse in oil prices. Experts say that oil companies will still shed jobs in the coming months as long as oil prices remain under $65 a barrel.
As a large number of Americans remain jobless or enter into industries with lower pay, their standard of living will take a huge hit. This spells trouble for their personal finances and obligations, say many of the nation’s financial institutions in a new survey.
Over the next couple of years, the U.S. could see a tidal wave of defaults unfold. Already, banks are reporting late or missed payments for a wide variety of financial products. Everything from auto loans to credit cards, mortgage payments to commercial real estate loans, huge scores of oil town Americans could eventually default on their responsibilities.
Essentially, the crash in oil prices is spilling over into loans made by both consumers and households, particularly in energy-dependent parts of the nation, according to a new report from the Federal Reserve.
“It’s a sign of how the deep spending cuts, mass layoffs and even bankruptcy filings in the oil patch are inflicting real pain in certain energy-focused states like Texas and North Dakota,” CNN Money reports.
Banks are already taking active measures to protect themselves from defaults. The Bank of America, for instance, has placed $1 billion into a rainy day fund to protect itself from loan losses from energy customers. JPMorgan Chase, meanwhile, has increased its provisions for credit losses by 88 percent.
Moving forward, 80 percent of banks polled by the U.S. central bank have tightened lending policies on new loans or lines of credit to energy firms. Other policies consist of restructuring loans, setting aside extra reserves, asking for more collateral and limiting oil firms’ option to draw down on credit lines.
We have seen these boom and bust cycles in the energy industry for years. The biggest problem is almost everyone lives above their income level. No one saves for anything, the got to have it now attitudes of the masses and easy credit, unchecked, will always end the same, plenty of crying.