Plunge in Global Oil Prices and Its Effect on Economies

From 2010 to early 2014, global oil prices have been stable. By mid-2014, oil prices started to drop and have continued to do so until now. One supposed reason for the drop in oil prices is the decline in demand for oil in 2014.

Green advocates have greatly encouraged less use of oil to decrease carbon emissions. Energy efficient vehicles, appliances, light bulbs, and other products result to less fuel consumption. This even includes homeowners who have reverted to using old fashioned fireplaces to warm their homes this winter to ensure that logs burn efficiently and produce less air pollution.

Another reason for the price drop is the growth of shale oil production in the United States. These may likely be the main driving force for the decline in global oil prices.

However great low oil prices sound to consumers, this sudden drop may forebode economic fallout in some countries. Falling oil prices will drag the price of other commodities down which may hurt emerging economies. Even stronger economies can be gravely affected as price deflation can spill to other sectors causing financial asset deflation which can cause a chain reaction that will eventually collapse markets.

On the other hand, more optimistic forecasters see a boost in consumer spending due to low prices of commodities. This increase will likely offset any ill effect on investments. Continued global economic growth would eventually push oil prices back up and stabilize it.

This is simple a great news to everyone. Even for budgeting Moms who will have a chance to buy extra edwin jagger razors for their husbands because of the little savings.

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