The global oil collapse has claimed its first victim: Russia. A 40-percent drop in the price of crude, the country’s dominant industry, has significantly reduced trade demand and coincided with a battering of the ruble, down 11 percent against the dollar just on Monday. With global supply well ahead of demand, and OPEC adamant that it will not limit production even if the price gets to $40 a barrel, Russia is stuck with a meltdown in the one sector it could rely on, as well as international sanctions over its interference in Ukraine. 

The Russian central bank tried to put on the brakes by hiking interest rates to 17 percent, which may stabilize the ruble (Russians are less likely to move their money abroad when it’s earning 17 percent in domestic banks), but freeze lending and investment, leading the country into a deep recession. 

U.S. commentators have received this news with a mixture of two words: “Ha” and “ha.” But the schadenfreude over Russia’s demise should be tempered by the knowledge that the U.S. has its own regional petro-states. As the White House never tires in pointing out, the U.S. leads the world in oil and gas production, and amid this collapse, those projects are under serious pressure. While the overall impact of falling oil prices may help our economy overall, it will hurt those areas dependent on fossil fuel production—and potentially, it could affect all of us. 

Taking the big-picture view, you can see lots of benefits from lower energy costs. Falling oil prices pull down inflation, which could keep the Federal Reserve from raising interest rates prematurely. But more generally, there are obviously two interested parties in any energy transaction—producers and consumers. And while producers may reap fewer profits from cheap oil, consumers ought to love it. 

AAA estimates that the average consumer is saving $100 a month on gasoline (Goldman Sachs puts the total savings at $75 billion over the past six months), and this has already led to surging retail sales. Lower-income households devote a greater proportion of their incomes to energy, and we can expect them to turn around and spend the extra cash. With consumer spending making up two-thirds of the economy, this results in a nice bump to gross domestic product. In fact, if you see this as a redistribution from oil producers to consumers, you can even tell a story about how it reduces inequality.

But a macroeconomic analysis obscures how the explosive growth in U.S. oil production—the biggest in 30 years—has been confined to a few select regions. In particular, areas with traditional oil or shale gas basins—including plains states like Wyoming and western North Dakota, as well as Oklahoma, Texas, and Alaska—have seen the biggest growth in production, as sophisticated drilling techniques become widespread.

These areas helped to increase employment in the oil and gas industry by 100,000 workers since 2010, with predictions of millions more in the coming years. But drilling for shale oil remains costlier than, for example, drilling for oil in the Middle East, and makes far more economic sense when prices are high. If prices pass the “breakeven” point, where the cost of production exceeds the revenue gained, those projects will grind to a halt, with idled rigs, reduced hours, and plenty of layoffs.

While it’s difficult to pinpoint the breakeven, with estimates varying wildly, there are indications that we’re getting close. One Morgan Stanley analysis shows that, under current prices, 80 percent of U.S. shale projects would lose money. This week, Goldman Sachs predicted a loss of $930 billion in future oil production, particularly in areas like south Texas and the Gulf of Mexico. Some reports show that production has already slowed in the lucrative Bakken oil field in North Dakota. Permits for new wells fell by 36 percent in both west Texas and North Dakota in November. Some Texas wildcatter veterans are already talking about going into “survival mode,” while their rookie counterparts in North Dakota have blown off the fears. 

In general, it’s good news for the world to have less oil drilling activity. But it is bad news for boomtowns that got fat and happy on drilling, without diversifying their economies to prepare for the aftermath. That aftermath may not come right away—if the well has already been drilled, it may make sense to keep going—but it’s bearing down fast. 

What sets these regions apart from, say, Russia, is that they have no independent monetary policy they can employ for quick relief. And the key regions for shale drilling happen to be fairly conservative, so you can hardly expect aggressive fiscal actions at the state level. In fact, many of these areas factor oil revenue into their government budgets, and so the result of a crash could be drastic spending cuts, affecting the most vulnerable members of society. North Dakota appears to be at least thinking about the implications of over-reliance on one volatile industry, but they haven’t fully prepared for the fallout yet.

The real unknown is how much domestic oil and gas production has been driven by debt, which could change this from a local to a national problem. Oil producers who financed their investments with borrowed money may not be able to pay back the loans, and default rates are expected to double over the next year. For this reason, investors have sought large interest rate premiums to hold energy-related bonds. Debt-laden producers have to keep pumping crude to pay off creditors, and that could create a fire sale where prices fall even further, putting more companies in rough spots as they reach their breakeven point. 

Moreover, borrowed money used to finance energy products often made its way into junk bonds made up of packages of corporate debt, known as “leveraged loans.” These loans have been enormously popular for investors seeking high returns. But the collapse of oil prices has sent investors running to withdraw from funds that purchase these securities. So far this appears to be limited to the energy sector, which is crashing. But nobody seems to know precisely how much energy debt was stuffed into these bonds. Investment managers are frantically scanning their portfolios to determine their exposure to energy-related debt. And if they cannot exit fast enough, it will result in significant financial stress.

One interesting theory argues that big banks needed to eliminate derivatives rules in the year-end budget bill to ensure bailout protection for their credit default swaps, and hedge their bets against an oil-related financial crash. This theory is bolstered by the fact that banks have had trouble getting energy-related junk debt off their balance sheets. Presumably we all remember what can happen when banks get saddled with toxic assets. 

This is all separate from how instability in Russia and several emerging markets could impact the U.S. economy. American mega-banks are exposed to global debt and will almost certainly have to write off loans from abroad. And trade will suffer from a prolonged, energy-related slump that ripples across the world.

The United States is big enough that major financial shocks like the oil collapse could have separate impacts in different parts of the country. But the potential for financial crisis exists in a way that it hasn’t since 2008. And the country is far less prepared for recession than it was then—we still have near-zero interest rates and a Congress opposed to fiscal stimulus. Maybe it will turn out for the best, but we should brace ourselves for the worst.