The Crashing Price Of Oil Is Going To Rip The Global Economy To Shreds
http://beforeitsnews.com/alternative/2015/01/the-crashing-price-of-oil-is-going-to-rip-the-global-economy-to-shreds-3091312.html
As I write this, the price of U.S. oil is sitting at $45.76 a barrel. It has fallen by more than 60 dollars a barrel since June. There is only one other time in history when we have seen anything like this happen before. That was in 2008, just prior to the worst financial crisis since the Great Depression.
But following the financial crisis of 2008, the price of oil rebounded fairly rapidly. As you will see below, there are very strong reasons to believe that it will not happen this time. And the longer the price of oil stays this low, the worse our problems are going to get. At a price of less than $50 a barrel, it is just a matter of time before we see a huge wave of energy company bankruptcies, massive job losses, a junk bond crash followed by a stock market crash, and a crisis in commodity derivatives unlike anything that we have ever seen before. So let’s hope that a very unlikely miracle happens and the price of oil rebounds substantially in the months ahead. Because if not, the price of oil is going to absolutely rip the global economy to shreds.
IMO, the 14-year period of low oil prices from 86-99 extended the Reagan boom. When oil prices moved up after 99, it exacerbated the recessionary effects of the dot com bust. $100 oil slowed the global economy to a crawl. Sub-$50 oil will give the global economy a real shot in the arm, and that may be what the Saudis intend. The fear is presumably of a global spiral into economic depression, which would tank oil demand to the levels that sent prices into the 30's in 1998. The quintupling of oil prices after 99 has been a major economic drag. The effect of this spike on world economies mirrors that of OPEC's post-Yom Kippur price hikes in the 70's and early 80's.