Jan

18

Listening to fin-tv, one hears over and over, "But low oil prices are good for the economy, so why is the market going lower?" And then a friend posed the same question. I said, well, there's a lag…

On the negative side are the oil producers and their ecosystem, who are no longer receiving that $2.5T in revenues. On the positive side are the consumers who are no longer paying that $2.5T.

On the positive side, the effects of, say, lower gasoline prices are generally subtle. Andy Average fills up the tank and notices that it's under $2 a gallon - cool. But he doesn't project forward the effects on his checking account for the next six months and then decide that now he can afford to buy that nice leather jacket. Instead, six months from now, a few hundred extra dollars have accumulated in the checking account, so he has to decide on the jacket, or paying down credit card debt.

A small business running a fleet of pickups doesn't see the lower prices as a game-changer or anything. Maybe budget for a few extra replacement tools.

But on the negative side, for the people no longer getting the $2.5T, it's a *crisis*. Debt restructuring, default or bankruptcy. Political instability - including the possibility of death - and civil unrest. Job losses, budget cuts, bonuses gone - major impact on individuals and families. Even Norway is having an oil-price crisis.

The negative consequences are immediate and vivid, while many of the positive consequences may go unnoticed for a while.


Comments

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search