Low Oil Prices: Good for your wallet but the global effects are surprising

 

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The world is divided fairly clearly into two groups when it comes to low oil prices. One group benefits from them, that being business and individuals that consume oil somehow. Peculiarly that means almost everyone, which you would think would render my thesis nonsensical. That’s your problem, sit still for a minute. The other group feels enormous pain, that being the producers. Given that consumers outnumber producers by about 6 billion people, the net benefit to humankind is obvious. Which also brings up one of the paradoxes of energy usage as we know it, that lower prices benefit people enormously but promote consumption that harms the environment…that’s a riddle for another day, but this topic is about how the repercussions of low oil prices are shocking from a global perspective.

 

First off, layoffs in the energy business happen overnight, with hundreds of thousands of well-paying jobs around the globe being vaporized. Well, vaporized might be a strong word, because the legendarily boom-and-bust industry will scramble to replace all these workers plus 20 percent more the next time oil prices shoot up. And since the jobs are so well paying, don’t get too weepy for the average oil patch worker who might be forced to consider selling the vacation home. Of course there are sad stories, but by and large when you drive a truck from oil well to oil well and get paid like a doctor, the thought should cross your mind as you bounce along that maybe this isn’t going to last forever.

 

Lost jobs make the headlines, but what really shakes things up is the effect on nations. For countries that consume more energy than they produce, a drop in oil prices is like the stuff politicians dream about. Lower energy prices are like lower taxes, it’s just free money in the hands of consumers and businesses who would have to spend the money anyway. The toughest part for politicians is that they lose their minds with frustration because they can’t take credit for it.

 

For nations that produce oil and live off the proceeds, a fall in oil prices is somewhat less amusing. Like the oil trucker deciding on which Rolex to get, petroleum fueled governments get used to the high cash flow that comes with high oil prices, and often embark on the sort of well-thought out spending sprees that a drunken 21 year old puts into action after winning twice his pay check on a slot machine in Vegas. Yes, you really do need those $1,200 pants.

 

Governments are no different, and spending lunacy is almost certain to follow large unforeseen profits from high oil prices. For the most exotic proof you may want to check out the Middle East, best from a distance, where anything but extremism is unfathomable. Add hundreds of billions in profits, unstable and unelected ruling classes, overprotective superpowers, and sprinkle it over populations that have hated each other for thousands of years and you will end up with a well-dressed and Ferrari-riddled powderkeg that is one traffic incident away from World War III. It’s one thing to sit in the desert and hate your neighbor when all you can do is throw rocks at him, it’s quite another when you have enough money to buy intercontinental missiles in your favorite color.

 

Norway and Alaska are the only exceptions of note; their governments have for some reason set aside vast sums of money for a rainy day. No one has figured that out yet; it can’t be the cold because Russia separates them and is crazier than anyone.

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