John Wainwright
11/30/2012
For an oil-using consumer the
fall is oil prices have a great outcome at the pump, especially during the
holiday season when people tend to spend a bit more on travel. The article
discusses how if a drop in DOW stock value that would match the volume of the
drop oil prices would shatter the entire stock market. This drop was driven by
OPEC’s decision to not cut oil production and the fact that oil producers
continually kept raising their outputs in response to the previously high oil
prices.
One bit of information that
intrigues me is what country will respond most positively to the drop in
prices, for several countries oil production and exports are major factors of their
economies (Venezuela, Nigeria and Russia). Russia in particular is hit very
hard, the economic sanctions imposed upon Russia are nearly half the size of
the expected loss Russia is expected to go through due to the drop in oil
prices. Scotland’s independence plan and their corresponding methods to dealing
with the new debt they would have incurred had expectations that the oil price
would be around 40 to 50 dollars higher than it is now. The fact that a drop in
the price of one good can affect countries around the world so greatly reveals how
much we rely on natural resources to fuel our economies. In particular the
Eurozone, if prices continue to drop I can envision how consumers would
continue to benefit while major oil companies and groups would struggle to make
profit or be sustainable in the long run.
I would ask the author how much
longer would this high supply have an effect on the price of oil, at what point
does the demand catch up to supply and return prices back to normal?
How does the lower price in oil
have an effect on the average persons commitment to help the environment? How
will this plan into the success or failure of “green” movements around the
world?
The effect and change in a commodity has on different countries around the globe is definitely very interesting to observe. With the drop in oil prices there will be many countries that benefit from this decrease, however a number will not benefit. These countries were listed in the article but one that stands out is Venezuela. The South American country relies heavily if not wholly on oil. Currently, the country is plagued by hyperinflation, scarcity and political instability. It will be very interesting to see how long these low prices stay and what long term effects Venezuela will experience.
ReplyDeleteIn terms of environmental responsibility, I do not believe the lower prices will significantly have an effect on commitment to the environment. The same idea goes for success of environmental movements. In most developed countries the awareness for protection of the environment is high and legislation as well as personal efforts have contributed to this awareness. Just because oil prices are low does not mean that people will all of sudden stop being environmentally responsible.
Lower oil prices could affect innovation in the alternative energy sector. There is less demand for alternative forms of energy and less incentive to create machines powered by any of form than oil if gas is more cost effective.
ReplyDeleteSince some countries economies depend on oil producing so much I wonder if governments will invest more into finding alternative energy sources so when something like this happens their economies won't be effected as much.
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