Two weeks ago, I took an immense amount of criticism in the comments section on both the IVN page and Facebook site for the article, 3 Reasons Why Lower Gas Prices Are Not A Good Thing.

Representing many of the comments was a highly liked one from Facebook:

It effects the rich negatively, but enriches the middle and lower classes. Was that ad paid for by the Russians?

In fairness, I'm not totally sure that many got past the title before they commented, because the article plainly stated that Americans would get an extended Christmas from the lower gas prices -- but then problems would start to settle in from the backlash of lower oil prices.

But, in response to many of the comments, I made a personal promise that I would keep tabs on this issue for the next six months and give credit (and criticism) where due.

So what's happened in the last two weeks?

New Beige Book

Eight times a year, the Federal Reserve releases its Beige Book, containing all available (or measured) economic data for the various regions of the Fed. This is considered the gold standard of economic forecasting, with Wall Street analysts basing most of their predictions on this data.

The information in the Beige Book wasn't as good as one would expect -- for either the oil industry or consumers.

The Kansas City and Dallas regions of the Fed reported the worst results, as they are the two areas with greatest dependence on the oil industry.

But the Christmas numbers, which were largely believed to be much higher from lower gas prices, came back flatter than expected across the regions.

Simply put, we aren't seeing the "extended Christmas" that I had originally projected, which could be from the same phenomenon that happened from the Economic Stimulus Act of 2008. People paid down debt, and didn't put the money into the economy through consumption as expected.

This is still a personal win for the individual consumer -- a zero-sum game for the net economy (at least in the shorter term).

Unfortunately, it will be another six weeks to see where these data trends go.

Job Losses

The world's largest oil servicing company, Schlumberger Ltd., announced on January 15 that it will be cutting 9,000 jobs, along with a $296 million charge to fourth-quarter results.

This has been the largest of the oil field jobs lost, but even ancillary companies and workers are feeling the hit.

U.S. Steel has announced that it is laying off almost 3 percent of its

North American workforce due to falling oil prices.

The Houston, Texas area is expecting at least 128,000 lost jobs, both directly and indirectly tied to oil by mid-2015, according to a senior Federal Reserve analyst.

While these layoffs have temporarily held stock prices steady, losses of this magnitude cannot continue without having a direct impact on the stock market as a whole.

The oil producing states are already starting to feel the pinch; it won't take long for the economy as a whole to feel the burden.

Several comments to the original article included statements like, "these people need to just go find jobs like the rest of us." And while there is an obvious truth to this, it doesn't happen instantaneously and market reallocation does not happen overnight (as the economic theories would like us to think).

The first place that the damage will be seen is in the state unemployment trust fund balances, which will update the preceding month by the seventh day of the following month. (And yes, I realize the catastrophic irony of this -- that when a person receives unemployment they are actually reducing the national debt.)

More Problems in the Banking Industry

Domestic oil producers are facing enormous debt service, and are continuing to pump, even at a loss, to make the payments. With this not being an indefinite strategy, bank losses are a real threat.

But it's not just the over-extended oil companies that are threatening the banks; it's the oil worker's financed homes, cars, and purchases (along with whole communities that are dependent on the oil industry) that are compounding the problem.

The FDIC keeps exceptionally good (although not exactly easy to use) public data on the state of the American banking system. Raw data and charts can be found here, as well as the FDIC's risk assessments for each banking area.

We have already had one major banking catastrophe in the past 10 years; I'm not sure we can handle another one.

What is the House of Saud up to?

As I have stated many times, we need to realize that this surplus of oil is from the deliberate glutting of the market by Saudi producers, and they can "flip the switch" and constrain oil production any time they choose to do so.

And then what? Gas at $6 a gallon because our domestic production has been destroyed?

The Saudi producers aren't even

profitable at these levels, and they were reaping huge profits prior to the glutting. There is a significant strategy being played out here -- one the West still doesn't fully understand.

It took years for domestic producers to "ramp up" production to the point where gas prices were lowered to $3 a gallon. How long will it take the next time oil prices surge?

Even key political issues, like the Keystone XL pipeline, have been tainted by the Saudi glut of oil. All newer oil production methods are in danger from the lower oil prices, but oil sand production (like what would be filling the Keystone XL) is one of the most expensive ways to produce oil. The economic feasibility of the program is now in question.

While I'm not a huge fan of the Keystone project, this is a decision that Americans should be making -- not Saudi princes. Our economy and political process should not be the plaything of a quasi-friendly government.

Where's the End?

When liberal and conservative media analysts agree, we probably need to take notice. The worst is yet to come.

I'm going to go out on a limb and say that the Schlumberger layoffs won't be the worst of it. There will be larger giants felled from this oil glut.

For the American consumer, I think the worst is going to come from whenever the Saudis accomplish their plans and then resume a strategy of constraining oil. Our nation could barely handle $4 a gallon gas; I'm not sure what would happen if it reached $5 or $6 a gallon.

One way or another, we need to prepare ourselves for a wild ride.