Dang it. I had a really good response to the OP’s question, but the internet collapsed and my response went with it.
But if I understand OP’s question, he says “Why is a decline in the price of oil lead to a decline in the market indices? Lower oil = lower energy prices, which should be good for the economy (unless you’re in the business of selling oil, that is).”
I think he misunderestimates exactly how much impact the oil boom has had on the national economy. Obviously I feel it in West Texas, but it also reaches into New Mexico, Oklahoma, Louisiana, South Texas, North Texas, Louisiana, North Dakota, Wyoming, Colorado, Utah, western New York, Pennsylvania, Ohio, West Virginia, California, and Michigan. (Yes, there is oil production in CA and MI, although most companies won’t operate there, because it’s such a PITA to get around the bleeding heart environmentalists and government red tape.)
And even in non-oil-producing areas, people are still working for oil companies. There are people who drive from St. Louis, Missouri to Alva, Oklahoma to drive trucks for service companies. They work for two weeks, sleep in their car, then they drive back to St. Louis to see their families. That’s right–they drive 550 miles, one-way, to work, because it pays better than the work they can get back in St. Louis.
So in much of the US, the oil boom has led to lower unemployment, higher wages, and has made a lot of millionaires out of the mineral rights owners through royalty payments. And (as tautological as this is) when people have money, they spend it. I believe the oil boom is largely responsible for the recovery of the US economy.
And conversely, when people don’t have money, they don’t spend it. And with a lot of oil companies slowing down or even cutting off exploration, there will be no more money. No more truck driving, no more rig hands, no more royalty payments, no rigs being built or moved, etc. This will have a ripple effect to other areas not associated with oil, simply because the revenue stream won’t be there.
So to sum it up, lower energy prices are good for users of energy, but unless there’s another industry that can absorb the job losses and replace the lost revenue stream, then the bad will outweigh the good.
(p.s. This is not exactly a well-thought out research report or scientific analysis, it’s more me thinking out loud. I say a lot of this with absolutely no evidence whatsoever.)
(p.p.s. I haven’t read the whole thread, I just read the first post. Sorry if I duplicated somebody else’s answer.)