What Low Oil Prices Mean for Nonprofits
The new year has kicked off with even more good news for U.S. consumers. The price of oil has continued its dramatic plummet, presenting unique fundraising opportunities – as well as challenges – for development professionals.
On January 6, the barrel price of gasoline fell below $50 for the first time in six years. The latest decrease follows industry projections that the United States is stockpiling reserves at an astonishing rate, potentially by as much as 700,000 surplus barrels a week.
In a November meeting of OPEC (the Organization of Petroleum Exporting Countries), member nations discussed the possibility of slashing production to limit the glut in international supplies, thereby curbing the spiraling price of crude oil. The cartel, however, opted not to. The decision stemmed largely from the interests of production leader Saudi Arabia, whose desire to maintain a massive market share won out over the appeal of short-term benefits offered by production cuts.
The reasons for the decline in oil prices are manifold, but chief among them is the increase in U.S. energy production. Since 2008, the United States has contributed 4 million barrels of crude oil a day to the global market, which amounts to 5 percent of the daily global production of crude oil. Combined with dismal growth projects for Asia and Europe, this uptick in U.S. oil production has spurred some of the lowest gas prices that the United States has seen in years.
All of these developments benefit the average U.S. consumer tremendously. If nonprofits calibrate their fundraising focus and acknowledge the new spending power of average U.S. consumers, they could increase revenue significantly, and continue to do so for a while; specialists expect no abatement in declining oil prices anytime soon.
Due to falling prices, motorists could save $75 billion on gasoline in 2015. The financial benefit from these savings to U.S. families could reach $1,100 in extra cash, allowing for greater spending and a growth of .3 – .4 percent for the U.S. economy.
General economic growth could in turn lead to more financial security for many U.S. families, emboldening them to give more to charity. And if giving trends during the recession were any indicator, this could bode very well for the nonprofit sector. Poorer and middle-class U.S. citizens increased their yearly giving by 4.5 percent over the course of the recession, whereas wealthier donors scaled back their donations by 4.6 percent.
The resilience of the average American’s giving spirit – in conjunction with an improving economy, greater disposable income, a resurgent dollar, and a growing interest in online giving – could mean that 2015 will be the year of small donors, giving more to make a difference on the issues they care most strongly about.
Declining oil prices, however, have not been a boon to everyone, and will reduce the giving power among certain demographics.
The stock market has taken a shellacking, as news of falling oil prices have led to energy stock selloffs and bearish market projections. On January 5, the Dow Jones Industrial Average fell 331.34 points, or by 1.8 percent. The Nasdaq fell by 72.24 points – amounting to a 1.6 decrease. As Kathy Jones from Charles Schwab notes, declining energy prices are a mixed blessing, as it benefits consumer spending while simultaneously harming investment, which makes up much of the capital wealth propping up petroleum businesses.
Outside of institutional pains felt on Wall Street, certain regions of the country are suffering due to the declining prices. Indeed, U.S. Steel just announced on January 6 that it will idle a plant in Lorain Ohio, putting 614 employees out of work. Energy production has occupied a larger share of the economy than ever before, and the glut of cheap oil spells trouble for certain regional economies. Eight states in particular are projected to suffer as a consequence of falling oil prices. Due to economic dependency on energy production, Louisiana, Alaska, New Mexico, Oklahoma, North Dakota, Texas, West Virginia and Wyoming comprise this group.
The overall impact on the spending (and giving) power of average U.S. consumers will be positive, as disposable income grows across much of the United States – specifically among demographics that have giving more to charity throughout the past five years. Giving levels rarely deviate from around 2 percent of GDP, meaning that, at the very least, charitable giving should grow proportionately along with the economy.
Investors and energy sector workers will take a hit, however, as the stock market retracts and energy companies lay off employees. Nonprofits and development professionals should be mindful of which side of the issue their target demographics fall. By doing so, nonprofits can hone their segmentation and craft better messaging the connects with prospective donors in a manner appropriate to their economic situation.