A barrel at west texas intermediate dipped below 50. So how will this dramatic collapse in energy costs impact the economy and consumers . Steve liesman takes a look. Reporter plunging oil prices raised a few economic puzzles. First, since the u. S. Is now such a huge oil producer wouldnt it be a drag on the economy or a benefit . This is key to the first, what will consumers do with the wind fall . Save spend, or pay down debt . Disappointing retail sales in december suggest consumers parting only reluctantly with the extra petro dollars in their pocket. People are waiting to see if this is real and take a while before adjusting their spending pattern. Reporter to be sure the case is not closed. Consumer spending was strong in october and november leaving some economists to forecast that Fourth Quarter growth will sport the best Consumer Spending number since the Great Recession ended. The december data may yet be revised and just because consumers took a break doesnt mean that the oil wind fall wont find its way into mall cash registers in january and beyond. I think its a blip in an otherwise strong trend for the consumer because look at the consumer backdrop. Healthy job growth increase in does posable income savings from the drop in Interest Rates, wealth depreciation and Consumer Sentiment is improving. Reporter lets go back to the first question. Is the plunge in oil good or bad . Right now, stock markets only see the negative. Plunging oil profits and oil stock prices. Soon enough, Capital Spending could take a hit while drilling new wells and the uncertainty. Are oil down because demand and growth weak worldwide . Its consumer why the consumer is key. Spending should be the key but so far its not. The rule of thumb, every 10 a barrel decline in oil means an extra quarter point to growth. But right now, the rule is being challenged as are the optimists who see Lower Oil Prices as a positive for the u. S. Economy but are still waiting for proof. For nightly business report, im steve liesman. For now, cheap crude means more growth for consumers. Some wonder how low is too low for oil. It is a delicate balance and there could be a point where the drag on the economy outweighs the pickup in Consumer Spending. Jackie deangelis explains. Reporter the crude crash continues with no end in sight. Prices on both sides of the atlantic now under 50 a barrel. While cheap crude means consumers could save 50 50 billion to 75 billion on gas, how low is too low . The drag outweighs the pickup for the Consumer Spending. Were in the beginning part of the price zone right now that hurts production in a big way and starts to reverberate through the economy, the manufacturing economy especially. It will be particularly painful if we do break the 40 level and if we break the 33 level, my low price target and we go down into the 20s, then its going to be a real bleak situation. Reporter production is just one risk if oil falls too low. The Ripple Effect is pulling back on hiring and laying off workers. In theory 1. 58 million jobs could be at stake if crude collapses to 20 or lower. Theres also a global impact. Lower oil prices dont just hurt the u. S. They could hurt canada russia venezuela and brazil to name a few. The fallout from this could trigger a Global Financial crisis. How long will we stay there . Goldman sachs adjusting 2015 price forecast to 47 a barrel and staying we could stay to 45 until the Fourth Quarter of the year. I agree with Goldman Sachs forecast. When you look at the supply demand it is skewed to the supply side and i dont think it will change before summer. I expect prices to be low going into the summer. Reporter while supply is key, so is demand and neither are seen changing anytime soon. For nightly business report, im jackie deangelis. And john kilduff joining us now with outlook for energy and oil prices. We heard in jackies piece you were looking at 33 a barrel. Last time we saw that was the financial crisis. Whats going to drive it to 33 or close to it . Thats precisely where i get the number from. Oil prices rally from that number to 100 or plus the past few years. The basic look at the chart falling down that should be the low point for it and its just all this intense selling going on not just in crude oil but the commodity sector generally, everything from live cattle to copper to coal and iron but that should be the landing point for crude. Thats what gets some of the technical buyers back in the market to make the bottom finally stick here. You mentioned 33 was where it settled during the financial crisis. At that time the oil price was a consequence of Something Else of the financial crisis. Some people are saying and jackie just did in the piece that this time if we go to 33 or break below that it could precipitate a financial crisis. Do you agree with that and what is the transmission mechanism, how did that happen . Just like in the financial crisis when all the mortgages went bad and seemingly everybody participated from individual homeowners to the big bank to the Big Insurance Companies because they all took a bet or made a bet on mortgages, housing, and playing out correctly, i dont see this as that systemic but the fear is that youre going to have a lot of junk debt implode and have a lot of these marginal companies go bankrupt. Once again, the Banks Holding the bag. Little companies borrowed heavily. Thats right. But only 20 of the junk bond market. Thats the fear. I dont think its enough. Its close. But i dont think theres a knockon or the derivatives part of the mortgage situation that are here. You dont have people taking side bets on the bets in that market. Bundled. Exactly. Its not as systemic. Its not as big. I dont think its big enough to take us all down, but it will leave a mark. What about the destabilizing effect globally . You look at russia which is suffering economically. Mr. Putin seems well ensconced there right now but if we do see 33 a barrel oil. I think thats the scariest part of this whole story. Destabilizing in particular for russia and venezuela, venezuela just about broke now as it is. And im not sure if putin survives to the end of this year even if the russian economy imploeds over this which is very likely to do. Theyre hocking the crown jewels closing their Sovereign Wealth Fund to prop up the ruble and see the owner of the new york nets selling to help the cause and repatereate. And the middle east not just saudi arabia and iraqs of the world, but prop them up as well. Thats an interesting point. I was thinking earlier, Falling Oil Prices has a bigger effect now than it would have had on the u. S. Economy because we are now a big major producer of oil again. But we have a diversified economy. So with those economies, not. The middle eastern economies, russia kazakhstan and others. Theres one trick ponies classic Mineral Resource boom bust economies when the prices do end bust and revolution we dont have the track to particularly favor u. S. Interest or western interest anymore. So i think thats a worry. But youre right, tyler. Thats another thing too about this. I think the worry about the job loss in the u. S. Drilling sector and its overblown as well. The job numbers i have are only several hundred thousand good paying jobs dont get me wrong but not enough to take us down there. Theres too many service jobs, jobs that have been part of this recovery that have gotten us to where we are with the gdp numbers. Its going to hurt with a mark but not taking us down. Well have you back later in the program with acquisition in the sector. Thank you very much. Still ahead from deep in the heart of texas, all the way up to north dakota some of the cities in the heart of Americas Energy boom are faring as prices head south. It was hailed as an oil boom for the first time in decades. The United States was increasing production dramatically and certain parts of the country were reaping the rewards from texas all the way up to north dakota local economies firing on all cylinders but the prices plummeting there is now concern that fortunes could change. Brian sullivan went to midland texas, willis north dakota and houston and canada calgary, to see the impact of oils plunge. Reporter with oil prices continuing to fall the oil industry here in texas is starting to feel some strain. And theres perhaps no place in the state that feels it as much as the city of midland. For the past few years, midland has been one of the Fastest Growing cities in the state and also has one of the highest average incomes of anyplace in america. Increased improvements in Drilling Technology and controversial practice of fracking set off a wave of investment in the west texas town for the past few years. In every direction here there are new companies, new construction. Building after building after oil rig, operators, Drillers Service companies and Everything Else that is attached to the permian base in oil surge. The permian boom sustains more than 400,000 jobs and more than 100 billion in total economic output. We asked long time oil man and resident paul ken worthy if it is all at risk. Certainly not going to go away entirely but from some of the equipment stacked in here its going to slow down. So the extent of the slowdown remains to be seen. Reporter but texas has seen this movie before. In the past two or three decades, there have been a number of oil boom and bust cycles in the state and those in the oil business do remain optimistic. Were only about 1 oversupplied so that will be corrected fairly quickly, i think, during 2015 and early 2016 and then be more of an equilibrium. Reporter the bigger older players have much lower cost of production many of the newer companies, maybe 50, 60, even 70 a barrel to remain profitable. Many residents in midland want to see how low theyre at these levels. People in willis ton, north dakota hope they dont become the center of a bocking bust. In the western edge of north dakota has been one of the greatest economic Success Stories of the past decade. As Oil Prices Rose production rose. From 165,000 to more than 1 Million Barrels per day in just five years. With that surge came jobs. High paying ones. Oil field workers and Truck Drivers can earn more than 100,000 per year. Help wanted signs are everywhere. Theres more jobs th people to fill them but people have incomecome all over the world and some bring everything in their car and some sleeping in their car because housing is so expensive. They have little in common except looking to cash in on the american dream. Two years. I think about 1400 rooms across two or three. About 7 or 8 hotels planned. Reporter producing oil here is expensive though. The ground is hard. Drilling takes more work. Most analysts put the average cost to bring a barrel of oil out of the ground at around 70 a barrel. And with oils recent collapse in price below that level, people here while still confident, are looking ahead. Plans are being made this year. And i dont see a slowdown. Theres a lot of infrastructure put in place. Theres a lot more wells still to be drilled. Reporter most agree these prices wont stop the boom at all once. The companies here are more efficient than others and can withstand the lower prices at least for now but is the real threat to the newer higher cost producers . Many may need oil prices above 80 a barrel to keep justifying the ratesing running. If prices stay at this a few months boom could come to a halt as quickly as it started. Here in canada oils price collapse is front page news. And while consumers love the drop in the price of gasoline the Oil Producers and the canadian government do not. Rapidly Falling Oil Prices hit everything from government budgets to infrastructure building to the Canadian Dollar and jobs. Massive Canadian Company seon corp. Announced it will lay off 1,000 workers cutting a billion dollars from Capital Spending plan. Its enough that high ranking government officials speak up about it. Oil prices continue to slip. We dont evidently have seen the bottom yet and this is opened up an enormous revenue short fall in terms of the governments budget. Quantified for next year as 6 billion to 7 billion. 5 billion the year after that. If we dont take action. Reporter though finding an answer to the growing crisis is complex, the cause of the problem is not. The world is simply producing more oil than it is using. So is supply and demand so out of whack, we asked an Oil Economist why dont the big Oil Producers simply cut back on production . When youve got a price war, all producers try to offset the revenue loss by producing more so its a free for all for the moment but, you know, until we start to see some of the participants in the global thing start to die off, were going to see low prices. Reporter canadas oil pain is not just a canada story. Stocks in more than 70 major Canadian Companies trade in the United States. A number of those are Oil Companies. And they have been walloped. Shares of bay techs energy Penn West Petroleum and Precision Drilling seen shares fall by 50 or 60 in just a matter of months. Some call calgary the houston of canada because of strong job market and fast growth but much of that is tied to the price of oil and if oils price were to fallow lower or stay at this level, the building boom you see behind us may run out of gas. Im Brian Sullivan in alberta, canada. Its not just energy and Oil Companies feeling the pinch of oil prices. As Morgan Brennan reports, the Ripple Effect is spreading into other sectors. Reporter the collapse in oil prices is beginning to take a toll on other industries. The United StatesSteel Corporation is temporarily idling two factories and laying off roughly 750 workers, a direct result of crudes dramatic plunge. Supplying tubes and pipes to oil and gas drillers is a key market for steel makers and up until now has been a bright spot for the hard hit industry. But with Energy Companies expected to slash Capital Spending by as much as 20 this year that means less steel. U. S. Direct steel consumption into the Energy Market is about 10 of the market but when you include energyrelated infrastructure that number bumps up to about 15 . So the weaker growth in oil and gas is really driving down the growth rate of u. S. Steel consumption this year. Reporter factor in a stronger dollar expected supply doesnt look good for the commodity in 2015 but isnt alone. Other Industrial Companies also beginning to feel oils effects. General electric recently said it expects revenue from oil and gas segments to fall this year. G. E. s business which makes kpes soars and drilling equipment was 20 of the 2013s sales with billions of dollars to expand that and after a year of stellar growth experts watch railroad operators as well. Because we see the potential for these lower crude prices to persist for a period of time in 2015. You could see some production drops. You could see some of the volumes come down. Reporter however, whether we dont know oil and related fracking supplies make up a tenth of overall rail volumes. Analysts say the caterpillar, laying off weakness in mining could come under pressure from exposure to oil and gas. And Archer Daniel midland could feel the pinch as export demand waens. But every company hurt by oil downturn many others benefitting. Airline carriers realizing cheaper fuel costs and retailers in theory could see a boost as consumers spend more on things other than gasoline. For nightly business report, im Morgan Brennan. The drop in oil could be a driver of merger and acquisition activity in the Energy Sector this year as corporate profits come under pressure and valuations fall, some companies could look to take over targets. John kilduff, back again. A little popcorn. So as these stock prices go down for some of these companies, youve got to figure other bigger whales out there might want to buy some of them. Who and which . Well obviously, as you saw from brians report there earlier, these companies, their stocks have gotten crushed. The prices knocking on debts door already when you forecast out the prices. So the acquired targets. The targets that should be buyed out by other companies. Should be in a position to be picking up the leftovers here or the dead bodies of this carnage coming. But companies then the small ones from Continental Resources on down mobile regency partners eqt and Companies Like those that are going to be struggling are to take over candidates. Theyve already been hammered. Im not saying to go rushing into these names right now but certainly, thats the model for whats going to happen and we saw this already as some see