Also, losses in energy-related jobs would be more than offset, by many many times, by the benefits that the industrial side of the economy would realize. The non-energy extracting part of the US's industrial base is far larger than the energy side. So yes, low energy would be a net gain. TX, OK, LA, the Dakotas and Alaska would suffer, but the rest of the country would be very happy. The current account deficit would be much lower by the amount of our oil bill from foreign sources as well.
With all due respect, the wall collasped in 1989 or so. It was 10 years later that oil went below $10 The EU is fighting for survival as we watch daily. Texas has the been the most robust job market in the US for a number of years. The fallout from the oil producing states, which now includes places like PA, ND and others that were not in the mix before. The scariest part is there is still not a lot of demand in the US for much of anything. Gas prices at the pump help a lot. 20 gallons at $2.50 vs. $4.00 puts $30 bucks in my pocket each week. But there are a lot of "mouths to feed" from the wellhead to the car tank. I think XOM has stated that the "price" should be around $65-70 per barrel. That price keeps them drilling. The reason for the big political storm over "tax breaks for big oil" was because at $10/bbl "big oil" was not bidding on leases in the Gulf. Could not make money at that price. They are not stupid. Personally, I think the lower housing prices will have a much more beneficial effect on the economy than price of gas. Everyone has to have a place to live, but they don't have to have a car/truck. It is going to be fun to watch.... SteveD
1. You posted it could go low and stay low for a long time, which is what I was responding to. FYI, the average price of WTI from 1980 to 1989 was 26.51. The average for 1990 to 1999 was 19.70. The average from 2000 to 2009 was 51.11, so I was pretty sure you were talking about the 90s. (source: http://research.stlouisfed.org/fred2/graph/?id=OILPRICE ) The big event of the 90s was the collapse of communism right at the start of the decade. That's why the average price in the 90s was so much less than the decades before and after. 2. The geographic spread of the energy industry matters about as much as the geographic spread of the defense industry. Both are a cost to most of the rest of the economy, and shrinkage in the cost of either would be a net benefit to the economy of the country as a whole.
tail wags the dog now and economies are slave to financial macro correlations and fake asset inflation. If Cl was $35, it would imply all other correlations would have plunged.
I don't understand the connection between the price of oil and the fall of communism?? Maybe for a few months or a year or two but the price was low from the mid 80"s to the late 90", a period of about 15 years. Cheap oil will produce my favorite law: The Law of Unintended Consequences......it always bites you in the ass when and where one least expects it, LOL. But, good research and good thinking on your part. We will just have to see. I don't think oil will go below $50 other than some sort of abnormal spike down. If it did, the world probably has much bigger worries. SteveD
If your job can be done from a house 45 minutes from the office, it can also be done from a foreigner's home 12 timezones away from the office.
No, oil's decline started 10 years before that after hitting an all-time high in 1980. No relation whatsoever. http://www.inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp Also, commie countries don't use a lot of energy. I saw East and West Berlin before the wall came down, and the difference was staggering. Pictures of N. and S. Korea reveal the same thing. http://www.globalsecurity.org/military/world/dprk/dprk-dark.htm
There was a large decline in the latter part of the 80s. Without the fall in Eastern Europe, there would have been no reason for that to continue. Communist industry was hugely inefficient, so it used more energy per unit of output than anything we would consider normal. All those factories pretty much came to a grinding halt after 1990, and that did impact prices for quite a while. There was a time in there where those countries were going through what amounted to a major depression at the same time as China had not yet ramped up to what it is today. By the late nineties, they were more or less getting back on their feet, while China was already becoming a major force. Hence the higher prices from 2000 on.