Posted on 01/26/2016 6:25:54 AM PST by doldrumsforgop
ALONG with bank runs and market crashes, oil shocks have rare power to set monsters loose. Starting with the Arab oil embargo of 1973, people have learnt that sudden surges in the price of oil cause economic havoc. Conversely, when the price slumps because of a glut, as in 1986, it has done the world a power of good. The rule of thumb is that a 10% fall in oil prices boosts growth by 0.1-0.5 percentage points.
In the past 18 months the price has fallen by 75%, from $110 a barrel to below $27. Yet this time the benefits are less certain. Although consumers have gained, producers are suffering grievously. The effects are spilling into financial markets, and could yet depress consumer confidence. Perhaps the benefits of such ultra-cheap oil still outweigh the costs, but markets have fallen so far so fast that even this is no longer clear.
The world is drowning in oil. Saudi Arabia is pumping at almost full tilt. It is widely thought that the Saudis want to drive out higher-cost producers from the industry, including some of the fracking firms that have boosted oil output in the United States from 5m barrels a day (b/d) in 2008 to over 9m b/d now. Saudi Arabia will also be prepared to suffer a lot of pain to thwart Iran, its bitter rival, which this week was poised to rejoin oil markets as nuclear sanctions were lifted, with potential output of 3m-4m b/d.
Despite the Saudis’ efforts, however, producers have proved resilient. Many frackers have eked out efficiencies.
(Excerpt) Read more at economist.com ...
A shot in the arm for some.
A death knell for the oil industry.
America’s economy is so shot, it’s beyond the time where cheap oil can help. The world maybe dead too.
Who should be afraid of falling oil prices? The global warming industry.
Low Oil prices are Good for the Citizens, but Very Very Bad for the Moneychangers,Financiers, and Government, and their victims, you know the ones that BORROWED EVERYTHING!
For many industries this is true. But the oil patch provides something that few industries do anymore - high paying blue collar jobs. When oil crashes thousands of these people will lose their jobs and there is no place they can go to replace the income.
And it creates a negative ripple effect throughout the country. I guess the goof who wrote this doesn’t understand this.
junk bond traders for one
How about moderate oil prices? Like maybe $60 a barrel? Reasonable energy costs, plus decent jobs in the industry.
They are, as long as you’re not in the energy sector, or sector that sells to the energy sector. When prices go way up or way down there are always winners AND losers.
A floating tariff that kicks in and out that puts a floor on the price of imported oil. Say a floor at $50.00 per bbl?
Do you know how hard it is these days to drill for chicken?
We have hit Peak Chicken. It’s all downhill from here...
Low oil prices are bad for manufacturers of oil drilling equipment, steel manufacturers, engineering companies, drilling companies, well servicing companies, manufacturers of components that go on a drilling rig, banks that have outstanding loans to these companies, and on and on.
And for more good news, the heads of Exxon/Mobil and RD Shell are predicting that the price of oil will probably not come back until mid 2017. This situation will affect the whole country as it develops.
Maybe because we grow food and put it in our gas tanks?
You got that right.
The oil patch is one of the few places where people that barely finished high school can make $300,000 or more/year.
It creates a positive ripple too. Not having to spend half your income on energy means more disposable income, which creates demand in a host of other industries, even as it wreaks chaos in the oil business.
Apples-oranges. Think back to the time of the causal relationship he’s posing here: the 1970’s. Fuel efficiency has had a significant jump versus those years, so working through the distribution chain (e.g., transportation) is going to have less impact than before. Also, part of the problem is that consumers are not using the addition to real income to buy new products. They are either saving it or paying down debt. At some point, however, consumers will be satisfied with their “savings cushion” or the debt removed, at which time I would expect to see a spending shot in the arm to the economy.
Who should be afraid of falling oil prices? The global warming industry.
OH! Stupid woman of course(speaking to myself)LOL Now that IS funny.
I tell you it has made a difference for our home economy I hope it continues. I travel 600 miles a week and I AM NOT ALONE>>>>>commutes are long for most but I love my small not spawl town(Yes, in NY state)
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