I had a gut feeling that the price at the pump was going the break the $3 mark-in the Bay Area- and $75 a barrel, and it did at the end of last week. It has taken 4 years to get to this low again. I am writing about this again, because it is really an intriguing thing and there are some strong forces making this happen. This is not just happening because there is more oil, there is mega strategy here. There are many positive consequences of having oil prices at the levels we are seeing today and it is redefining world economics for sure. The Saudis, the Russians, and all the big producers, must be very concerned about this drop in prices. When you are talking about a 31% decline in revenue in four months, this is definitely going to affect your economy. Here in the US the average citizen is feeling the impact in a positive way. There is going to be more spending this holiday.
- It is going to help in economic recovery. Of course the oil industry is not going to benefit from this decline and they are going to take every possible measure for the price to go up once again. How many years this industry has been living the life because of high prices? How many years’ oil speculators have been amassing millions in detriment of the average citizen? How many years have investment bankers benefited with a continuous increase? The modest GDP growth we’ve been having recently in the US, has only benefited Wall Street and large corporations-they have high profits right now- but this has not been the case for the majority. The other day I heard an investment banker say that this reduction in oil prices was not necessarily good for the economy, he is right for the groups he represents, but for the majority how can it not be good? This is not rocket science. It is well known, that the most benefited in the last decades have been the top 2% while the rest has decreased its purchasing power. Maybe it’s time to change this trend. Real growth is when the middle class expands. With today’s conditions, we could be in for a much steadier growth and one that ripples down to the middle and lower class.
- American made automobiles sales continue to grow every year. Big cars made in the USA are selling more once again while the hybrids are starting to struggle because of low oil prices. It is OK to be selling more of the big trucks but let’s hope that most folks have learned the lesson and that the trend to be driving huge cars is declining, not only to save fuel and money but for the environment with gas emissions. If you work in construction and need a big truck, so be it, if not drive a reasonable size car. I think that after the last crash of 2008, most people are more aware of this. The good thing is that every day you see more hybrids and electric cars and charging stations everywhere, there is not stopping the trend and consciousness.
- Economic and political outlook. The transportation industry-truck, railroad, air, and cars-is on the increase. Everyone is gearing up for a very busy holiday season. This is moving the economy, anywhere from shipping more packages to more travelling for leisure. If prices stay put at around $75 a barrel-in our globalized world this could change in a minute’s time if there is a strategic bomb somewhere, a hurricane, a dictator invading other countries, price concertation, etc. – we are in for a new era. Politically speaking, despite the harsh daily criticism against the incumbent party, and the recent victory of the GOP in both houses, things could start to improve faster despite the many problems that we still face today. Every month the economy looks better but at a slow pace. The problem is that people fast forget things and are too short term driven. There is discontent among the majority because growth is to slow-understandable- and attacks and criticism are fierce, that is why we have the outcome of the recent election. I am an independent and do tend to look at the entire scenario of how things have developed since 2008 and am optimistic about the future and not everything has to be bad. Good things and bad things have happened. The shame is going to be, if everything good that has happened is regressed or changed. From what I saw yesterday, Japan is going into a recession, China has decelerated, and Europe is slow growing, the US is the outperforming the rest.
It be interesting to see what happens next with oil.