Oil Is So Cheap Now. So What?
While you slackers were all spending quality time with your families, the global oil markets were plummeting! This is good news, perhaps. Or maybe bad news? Let's explore how this will save—or possibly destroy—our world.
THE ECONOMIC NEWS THAT YOU, THE CONSUMER, **NEED** TO KNOW: The price of oil has been falling for months now, but last week it dropped to under $70 per barrel for the first time since 2010, and forecasters think it could head much lower still. The reason for this ongoing decline is basically: oil production is booming, oil demand is declining, and despite this, oil producers have decided to just keep on pumping out oil—to the max! If you would like a more detailed explanation, go read an oil industry trade publication.
THE WINNERS: You, the consumer. Oil is cheaper! Gas for your car is cheaper! And other things that use oil, also, they will be cheaper! That extra money in your pocket was what analysts assumed that you, the consumer, would use to spend on tons of shit on Black Friday. Instead, Black Friday sales were down 11% from last year. This makes me suspect that you, the consumer, may be smarter than we give you credit for.
Also a winner: the earth's climate, maybe. One the one hand, falling oil prices in the long term could prevent new oil pipelines from being built, and could discourage energy companies from pumping a lot of oil out of the ground, which would be a huge bonus for those of us who do not wish to be baked to a crisp by global warming. (Many "nontraditional" forms of oil production, like tar sands, for example, require an oil price of close to $100 a barrel to be worthwhile.)
On the other hand, in the short run, cheap oil prices are an incentive for you, the consumer, to use more oil, because that shit is so cheap. So we'll have to wait and see.
THE LOSERS: Oil companies. More importantly, every national government that depends on oil revenues for a significant part of its funding. Russia is fucked! Venezuela is terrified! Canada is worried! Nigeria is tense! Iran is screwed (more than usual)!
The major oil producers in the Middle East are hoping that by keeping up their production and driving prices down, they can put a lot of their overseas competition out of business, freeing them to go ahead and raise oil prices once again. Will that work? Who the fuck knows? A sunny way to look at it is that the less valuable Middle Eastern oil is, the lower the incentive for the U.S. to involve itself in brutal wars in that region of the world with the unstated purpose of protecting our own energy interests :):):):)
Crashing oil prices could, however, destabilize lots of Middle Eastern nations whose economies depend on oil, further angering and alienating an entire generation of people who already hate us :(:(:(:(
THE TAKEAWAY FOR YOU, THE ONLY VERY MILDLY INTERESTED CONSUMER: Oil is cheaper now than it's been in a while, and looks to be getting cheaper still. Gas could be cheaper for a while. Nice. Saving some money. A long stretch of low oil prices could have the nice effect of driving a lot of mental and industrial and economic effort out of the oil exploration and exploitation business and into, you know, just about any other business, almost all of which are better for the world's long term health than the oil exploration and exploitation business. (Oil prices tend to fluctuate like a motherfucker , so betting on prices staying low for a long time is no sure thing.) At the same time, though, we must be careful not to allow this new world of slightly cheaper gas to make us all profligate and blase in our attitude towards fossil fuel usage, or we shall surely die.
Merry Christmas... or is it? Stay tuned (to Gawker.com).
[Photo: AP]