It’s my strong belief that oil’s extreme rise in 2007-2008 triggered The Great Recession (by triggering the subprime meltdown)…
… but that oil’s extreme decline in 2008-2009 ultimately revived the economy (by putting more money in people’s pockets to save & spend).
(For more on oil and the economy, either search my blog for “oil”… or click here for something I wrote in 2009.)
Over the last few years oil scarily started rising again… back above the $100 level… which has acted as a tipping point in the past.
It did so gradually, though, i.e., didn’t misbehave… i.e., didn’t spike and didn’t cause the price of everything to crushingly spike (like it did in the period leading up to The Great Recession). The world — including the world economy — is OK with gradual things.
But oil has been in retreat since June.
On Friday — with OPEC deciding not to cut production — oil plummeted…
… and by the end of the day was down more than 10%… to $66 a barrel, something we haven’t seen since (coincidentally) 2009.
And, expectations are that it will keep declining.
Which should be great news… unless of course you’re reading the news headlines, which is pretty much painting the decline as a disaster.
While it is tough news for the energy sector, it’s AWESOME news for 100% of everything else… because lower oil ultimately translates into (I’ll say it again) more money in people’s pockets to save & spend.
Why would the press do this? I’m tempted to say “attention getting” (i.e., sensationalism), which I believe is partially true, but I suspect it’s also a nice contrast with the other positive news of the day… and there’s certainly news this year to be thankful on this Thanksgiving weekend.
Maybe more to the point: Why wouldn’t OPEC cut supply, which would increase demand and therefore increase price?
Best guess is they are trying to drive oil prices down… which will make it harder to justify all the great investment going into energy alternatives… not just clean alternatives like solar and wind, but also increasing domestic oil supplies, too.
No doubt, OPEC is playing hardball with everyone in the energy business…
… which, thankfully, helps everyone else on the planet.
P.S. Now we just have to make sure Europe doesn’t implode, Ebola doesn’t dig in, the U.S. debt ceiling doesn’t collapse, etc., etc.!