Energy rush: fuel prices are impacting Utah manufacturing and transportation sectors.

• Author: Vanek, Jeff
• Position: Business Trends

Late last year, it wasn't uncommon to see cars across Utah lined up around the block, waiting to fuel up at their local gas station. Gas prices dropped significantly in late 2014--which for many consumers seemed too good to be true. However, from August 2014 to January 2015, fuel prices continually decreased for a record 123 days, according to AAA Utah. During that time, prices fell from an average of $3.67 a gallon to $1.92 a gallon. In comparison, gas prices nationally fell from an average of $3.47 a gallon to $2.19 a gallon.

While continuously decreasing gas prices caused cheering among drivers across the United States and in Utah, the effects of the falling prices weren't all good--for many industries, it proved to be a mixed bag. That's because falling prices at the pump also meant the cost of a barrel of crude oil had declined dramatically, from the mid-$80 per barrel range to the mid-$40 per barrel range. This decrease specifically affected the local manufacturing and transportation industries.

Advantages

While on the whole, falling oil prices are good for the economy, says Tyson Smith, regional economist with the Utah Department of Workforce Services, the falling oil prices have introduced an unexpected factor into the employment question in manufacturing.

"For decades, jobs in manufacturing, which includes all types of manufacturing, from foods to durable goods, have been generally declining," he says. "With falling oil prices though, employment in petroleum-related manufacturing industries is most likely to increase."

Total employment for all oil-related manufacturing jobs in Utah has been just over 120,000 and represents about 10 percent of total employment in the state, excluding farm-related jobs. Oil-related manufacturing falls into three major industry groups: plastics and rubber, chemicals, and petroleum and coal producers.

The largest employer of these three industry groups are the plastics and rubber products manufacturers. This group employs just over 10,000 people in the state. Low oil prices are a positive for these industries, translating into a decrease in the cost of materials and a potential increase in profits. When profits are good, businesses usually increase capital expenditures, invest more and hire additional people. It's the same story for the second largest group of oil-related manufacturers: chemical manufacturers, which have over 8,000 people employed.

The third largest category of manufacturers, petroleum...