What is the fallout of cheap oil?

Discussion in 'Economics' started by huh, Oct 26, 2008.

  1. huh


    We're starting to see some fallout from the oil price plummet and just wanted to get ideas on what people think the economic impact of this could be. The first glaring thing is the market. Financials and Energy are a major part of the S&P. Financials got destroyed earlier this year and Energy was holding up the market but now with oil falling there's just no leadership now. Looks like americans were screaming for cheaper oil and they got it.....unfortunately their 401Ks got cheaper too!

    Next thing would be, now that all these oil pumping nations are use to free money to the tune of $100+ per barrel oil, I'm sure their own spending habits had increased becaus of this free money. Now that punch bowl is gone so how are they going to cope with it?

    Is Chavez hosed in Venezula? What about Iran?

    Our government is planning to spend MORE next year while they're going to collect less taxes from a country in a recession so how do we pay for the spending? With less gas being pumped, the government further loses revenues that they collect from each gallon of gas that is sold. Finally, if our debt buying "friends" in Saudi Arabia are now having to tighten the belt because oil is down to 50 or 60 bucks a barrel, are they gonna have money left over to buy more US debt that is coming next year?

    China is slowing because of the global recession so are they gonna have money to buy are massive budget deficit next year?

    Man scary but interesting times are coming......
  2. The dollar has strengthened by 30 percent while oil fell by around 40-50 percent over the same time frame. That mitigates a great deal of the pressure put on oil producing countries because the currency that oil is traded in, is the dollar.
  3. Its good for the economy.

    Supply-side economics (right-ward shift), allows cheaper manufacture & prices whilst maintaining profit margins = greater consumption per dollar spent.