Cheaper oil will only increase our petro-dependencyby Paul Bledsoe / January 21, 2015 / Leave a comment
Published in February 2015 issue of Prospect Magazine
Good economic news, at last. The 50 per cent freefall in oil prices is a huge “shot in the arm for the global economy,” as the International Monetary Fund put it, boosting worldwide spending and employment everywhere but petro-states. United States growth has hit a 10 year high to an annualised 5 per cent; Americans will save an average of $550 per household from lower prices in 2015 alone. In the UK, cheap oil pushed inflation down to 1 per cent, below wage growth (1.6 per cent), so beleaguered workers are finally making slight gains in real terms, with total employment reaching new highs and retail sales booming.
Geopolitical mavens seem satisfied that low prices have undermined the Organisation of the Petroleum Exporting Countries’ long-held pricing power, as member states battle for market share amid declining revenue, while exerting extreme political pressure on oil-soaked regimes from Moscow to Tehran to Caracas. And prices may fall further and stay lower as structural elements in the global oil market—softer demand in Asia, more efficient cars, and desperate oil-funded governments pumping like mad—seem to suggest.
Amid such unrelieved blessings, is there a fly in the ointment anywhere? Can all the news be good? Of course not.