Yeah, I know the market tanked again today. The bears reign supreme.
But oil fell below $60 a barrel. That’s surely a silver lining to the economic storm clouds we face. I filled up my car today for $50, the first time doing so has been so inexpensive in months. Now, that’s still a way above historical average price. In terms of real dollars, it’s still about twice its historical cost and half again what we were paying with only moderate discomfort in the early 2000’s.
Still, gasoline is getting cheaper. This is a significant counter-inflationary development. As you know, I’ve suggested for a while that the rising price of oil was a big depressor on the economy and a directly inflationary issue that was not being addressed in any meaningful way by anyone (in large part because no one knew what to do about it).
If oil levels off at this point – or continues to fall, as the expert in the linked article suggests it will – will that be enough to get some economic activity going again? We’re not going to get back to where we were a month ago anytime soon, but if there’s growth from here, that would be good enough for the time being.
The tarnish on this silver lining is that oil-rich nations now need their oil income to meet their budgets, and all of them are much more heavily socialized than the U.S. Nations like Venezuela, Saudi Arabia, and Russia rely on high prices to support their less-diversified and economies that are burdened with heavy amounts of government participation in their markets. This will drag global markets and potentially create political instability there.
And, in more good news, we’re not as bad off as Iceland, who apparently need to accept a huge loan from Russia that they have no idea how to pay off.