Little Good from Falling Oil Prices

Comments from the Editor in Chief

It is probable that Trump thinks that falling oil prices ($31 a barrel now) are good because his Beast (the car that he sits in) uses 1 gallon for each mile – the car is overweight and so is he…

He also has said that this is “great for consumers” because they will have more money in their pockets after filling up their cars. Naturally they will also save money by having shorter lives – more oil fumes means bad air and more lung disease, but he did not mention this because he does not believe in climate change. 

Like the Brits, who thought that they have their Brexit cake but only get to eat some leftover crumbs, the American consumer will end up being much worse off in the coming years unless much more action is taken to curb oil consumption. Early death is not something that should make you happy.

Trump has also decided to buy American shale oil for emergency supplies to help out Big Oil’s failed investments in shale oil. They support him with generous funding. When will Americans wake up to see that using their money to get himself re-elected is a criminal use of money? This is simple theft!

The Saudis started the big slide in oil prices this time. They are selling a lot more because they are spending huge amounts on defence. Their great leader is a dominant leader like Kim, and a very stable genius like Trump. It is good that they sell more now because that will continue to push down the price even more when demand is so weak and that will hurt US shale oil producers and Russia.

Russia followed the Saudi decision to break with OPEC and reduce oil prices by dumping more oil into the markets. Russia needs to sell more oil to raise more money as the price falls, although one must doubt if they are really producing oil at a profit. Since a large part of the proceeds from selling oil probably goes to Putin & Co. perhaps a reduction in oil revenues will cool his spending habits on supporting nasty wars like the one in Syria. His spending budgets for such actions will be under pressure.

The Nordic governments collect a significant amount of revenues from a direct tax on transport fuels. A fall in consumption or a fall in fuel price at the pump reduces revenues. Now we have a double whammy and this must be made up either by increasing other taxes (unlikely), or by reducing public spending (unlikely), or by borrowing more (very likely)… and that means higher interest rates.

But the rest of the world has no reason to be happy about falling oil prices. Cheaper oil means more pollution, it means slower transition from fossil fuels and more borrowing for our grandchildren to pay off…

The conclusion is that this is not very good news for us because there are few signs that Russia has stopped supporting Mr. Assad.

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