Sub-$2 gasoline is reality in parts of the U.S. and will probably be common by January. That's great news for drivers and consumers. It's not so great for the energy industry.
The list of oil-collapse victims will grow longer as low prices persist — but so will the number of winners. Economic change is always a double-edged sword. In this case, energy consumers will come out ahead as energy producers suffer.
On a national level, the U.S. will probably be a net winner, but we will also have many losers. Their numbers will grow to include people and businesses outside the energy sector, too. Our interconnected economy will spread the pain, just as it shared the gains from new shale oil and gas discoveries.
Here are three segments of the economy I think will feel an impact in early 2015.
Boomtown real estate: Much like the 19th century gold rushes, this century's shale rush made entire towns pop up out of nowhere. North Dakota, South Texas and parts of Pennsylvania found themselves hosting well-paid workers who needed housing, food, recreation and all the other luxuries of civilization.
Local entrepreneurs capitalized on the sudden demand in these places. Some became wealthy, which isn't hard when you can rent out small trailer homes for thousands of dollars a month. That game is going to end as drilling activity slows in the next year or two.
Oil state budgets: State and local governments found ways to capitalize on the boom, too. The taxes and fees they imposed on the energy industry were partly justified, to the extent the industry created higher burdens on public services. Heavy vehicle traffic can destroy roads and bridges designed for lighter use.
On the other hand, there is also no doubt that local politicians milked the shale companies to pay for projects benefiting local voters. Many of those projects and programs will soon face funding shortfalls. North Dakota and Alaska are probably the most vulnerable, but others will feel the pinch, too.
Energy lenders: This is probably the scariest consequence of falling oil prices. Could it spark a financial crisis and recession akin to the 2008 subprime mortgage crisis? Probably not, but I wouldn't rule out the possibility.
Shale wildcatters financed a startling amount of their activity by taking on debt, often in the form of high-yield, or junk, bonds. The ability to repay those loans is now in serious doubt for some companies. Their cash flow projections assumed $80 or higher oil prices in many cases.
This is a problem for the lenders as well as the borrowers. Junk-rated energy sector bond prices are already falling fast and will likely get worse. The yield-hungry investors who bought those bonds, many through high-yield bond mutual funds, could face major capital losses.
In a worst-case scenario, leveraged energy bond markdowns could set off a domino effect in financial markets, just as mortgages did in 2008. It could take many months to unfold, but eventually there will have to be a bloodletting. The only question is how deep the blood will flow.
As you can see, the crude oil collapse isn't just an energy industry problem. The impact will spread in ways we can't imagine right now — as will the benefits of lower fuel prices. I think these consequences will drive next year's trading activity, so get ready for action. You're going to see some.