I know there are many folks who work in the oil industry, but I wish someone could explain how lower oil prices are so terrible for the rest of the economy. It’s my understanding that our modern economy is very energy dependent. Cheap oil would be bad for the oil companies of course, but what about everyone else who are consumers of oil and all of the products made from it? Certainly far, far more people are oil consumers than oil producers.
Yes, I thought $4 a gallon gas was a part of the 2008 troubles. Now potential $1 a gallon gas is part of the 2016 troubles.
This is all orchestrated. The Saudis are sitting on a lake of oil and are the puppetmasters when it comes to releasing that oil for consumption. When America started booming with oil from shale deposits, the Saudis were not going to sit idly by as America became energy independent, so they opened the spigots so that worldwide money went to them instead of us. That put American workers out of business, because the Saudis pulled it out of the ground cheaper and had more of it.
Obama vetoed Keystone, because he knew that it would increase our ability to fend for ourselves on the world stage. That also gives the Saudis additional greenbacks. Couple that with the push for “green” in America with everything from automobiles to yo-yos, and petroleum is less in demand, thus leaving scads of it on the world market just waiting to be consumed.
This is all a ruse. The fix is in. Most Americans are too stupid to understand what’s happening, but give it time, and we’ll all be wondering what happened. Gas will be cheap, but food will be hard to find.
2. The low oil prices themselves are the real problem. In this case, the cause of the low prices could be alarming. If the price drop is driven by a steep decline in global demand, then that itself is an indicator of an overall economic decline that goes far beyond just the energy sector.
I think the problem arises from massive amounts of loans made to oil companies and affiliated vendors all down the line that were predicated on the belief that oil would stay safely above a minimum level needed to service those loans. Now oil is well below that minimum required level which means 100’s of billions of dollars in loans are about to default.
That, in turn, could take out the loaning banks, leading to a cascade type failure of the entire global financing scheme (being polite in choice of words, think of the adjective Ponzi).
Anyway, I think that is the problem, or at least the perceived problem with cratering oil prices.
Exactly. Cheap oil and natural gas is beneficial to every family at the pump, in our energy bills and to every business not connected to the oil business. Food prices should come down. The cost of everything shipped should come down. Amazon will be having a field day soon.
No, it's the chicken little press trying to dodge from the issues that their candidate is bombing and so is their president.
“I know there are many folks who work in the oil industry, but I wish someone could explain how lower oil prices are so terrible for the rest of the economy.”
Supposedly, the drop in oil reflects an emerging world wide recession. The world economies are retracting, not expanding. Consequently, they aren’t buying oil and the price is dropping. It’s not that the price of oil is driving the economies/markets lower, it’s that the lower price of oil reflects something else that driving markets/economies lower. I’ve read reports where oil demand is actually up, but oil is so plentiful that it is driving prices lower.
Personally, I think the real culprit is China. China stimulated the crap out of their economy and stock market over the past few years. Their stimulus made ours look small. As China slows, it creates a ripple in the countries China was buying commodities to turn into manufactured goods.
There are a significant number of commodity based economies that are struggling to cope. Australia, Brazil, all the oil producing countries, etc. These struggles reduce demand for manufactured goods, ie, trucks, tractors, airplanes, consumer goods, etc. It’s a vicious circle.
BTW, don’t bet on my opinion being right. But, I went to 100% cash yesterday. Should have done that a month ago.
It's not that low oil is so bad for the economy. It's more than low oil is a SYMPTOM of a BAD economy. When you are not moving as many goods around...making as many things...you need less oil. When oil builds a surplus and you need less of it...the supply-demand curve kills you.
The low price of oil is the fever...not the illness. However, when prices go too high...then there is a choking point on the economy. It does stifle growth. It's just doesn't work that way when its reversed.
Low oil prices are not a direct problem for the economy.
Because of low oil prices, hundreds of billions of dollars are no longer being invested per year by the oil companies.
That is a lot of steel, pipe, valves, pumps, motors, cables, controllers, etc that isn't getting ordered. Also big decreases in equipment ordered by Caterpillar, etc.
The direct oil jobs lost are only a fraction of the total jobs lossed in the US from this size of drastic fall in prices.
The only bright spot in the economy for the past few years has been in oil and natural gas development ( part of the economy the administration had yet to over regulate ). Cheap oil ( partially because Saudi Arabia is dumping trying to collapse the US developers ) is driving the whole sector into a deep recession shedding jobs and support industries.
Maybe the drop in oil prices is really just an indicator of a bigger problem. Cheap gas should be getting used but it isn't. Gas is cheap because demand is gone. Where did it go. The hidden recession that Hussein doesn't want you to know about looks like a good deal in gas prices but it's really a symptom.
Second point: In Iowa all agricultural industries are in the tank because demand is down and the desire for ethanol is down. So there goes John Deere and the value of farm land and farm income. The company for whom I work is supported by the ethanol industry and we are really slow right now.
Well, yes, lower gasoline/diesel prices will help those heavily dependent on those products. However, think about this; every direct (i.e. people directly employed by the company involved in drilling/extracting, etc...) is supported by a vast network of suppliers. When one drilling rig or well is shut down, then that rig or well no longer needs any supplies, workers, or support. All those involved will have to find other places to pick up that slack, or lay people off.
On the flip side of that, for every oil worker and support person who were making money on those jobs and have found themselves out of work, there will no longer be those people spending the same amount of money in the economy.
So restaurant jobs, stores, local business, shipping, and a multitude of other jobs that were not directly related to oil production, but a beneficiary of it, will now shrink. Then those people who were making money from the results of oil jobs are no longer making money from the oil people, either.