Falling oil prices could spark global turmoil?

[dud]

I thought that this deserved to be posted as an ironic counter to this thread:


http://forums.anandtech.com/showthread.php?t=2126754&highlight=oil


Here is the link:

http://money.cnn.com/2013/07/18/news/economy/opec-oil/index.html?hpt=hp_t3


Excerpts:

"Oil producing nations in the Middle East and elsewhere have used bulging oil revenues of the last few years to placate their people. No place is this more true than Saudi Arabia, which has subsidized housing, health care, gasoline and a host of other things to the tune of hundreds of billions of dollars since the Arab Spring protests began in 2010.

As a result, Saudi Arabia now needs oil prices close to $100 a barrel just to balance its budget. If oil prices fall, it may have to cut social spending. In a country that's been a reliable oil exporter to the global market for over half a century, yet has both a restless segment clamoring for reform as well as extremists in the ranks, the repercussions could extend well beyond OPEC."



"The pain won't be evenly spread. Iran, Venezuela and Nigeria are already thought to be exceeding spending relative to what oil revenues bring in, and are particularly vulnerable to a fall in oil prices in the next few years.

"In Iran, it could be a factor in regime change," said Steffen Hertog, an assistant professor of Middle East policy and economy at the London School of Economics. "It could certainly instigate a wave of popular unrest."

In Venezuela, where previous attempts to bring pennies-a-gallon gas prices closer to market rates preceded deadly riots and the toppling of the government, falling oil revenue could also bring about a change in regime, according to Hertog -- although he thinks the change would probably occur at the ballot box instead of the streets."


I'm having a hard time feeling bad for paying less for gas right now ...

 

[zsdersw]

The growing energy independence of the US is helping this along, too.

 

[Thebobo]

But the price just went up like 16 cents here...

 

[zsdersw]

But the price just went up like 16 cents here...

 

[StrangerGuy]

Suck it up bitches. Any half-decent economist would have told them to diversify away from oil exports...Like 20 years ago?

Where's the sympathy for nations that didn't lucked out on black gold?

 

[Tweak155]

This really seems like it is indicating they need to raise oil prices just to survive. Guess the market will only take them so far?

 

[chucky2]

These countries don't need to worry about debt. They need to deficit spend like crazy while providing expensive social services. Spenders (of which I am one now) assure us that is the path to economy stimulus, and thus, will be for them also. No wrong can be done here, in perpetuity...

 

[JockoJohnson]

Can't these countries just print more money?

 

[zsdersw]

Can't these countries just print more money?

Sure, just ask Zimbabwe how that works. A loaf of bread ended up costing $100 billion before they said "ok, this isn't gonna work anymore."

 

[Attic]

Sure, just ask Zimbabwe how that works. A loaf of bread ended up costing $100 billion before they said "ok, this isn't gonna work anymore."

I think they realized it wasn't going to work when the price was at a $1000 for a loaf of bread, but they couldn't stop the force once they built it.

 

[cubby1223]

Sure, just ask Zimbabwe how that works. A loaf of bread ended up costing $100 billion before they said "ok, this isn't gonna work anymore."

...and the load of bread jumped to $200 billion by 8pm that day.

 

[cubby1223]

I think everyone agrees it's pretty much a given there will be mass turmoil when the oil revenues stop coming to these countries, whether it's from falling prices or from dwindling supplies.

I recall a political commercial that played here in Illinois few years back that basically if you don't support cap and tax then you are directly supporting terrorism (buy buying overseas oil). Now you can probably also run political ads that say if you support energy independence and energy usage reductions then you are directly encouraging terrorism!

 

[Hayabusa Rider]

I think everyone agrees it's pretty much a given there will be mass turmoil when the oil revenues stop coming to these countries, whether it's from falling prices or from dwindling supplies.

Which I believe a reason for us still being dependent on oil. If I developed a method of free energy with no environmental downside, some guy would stamp "state secret" over it and that would be that.

 

[JockoJohnson]

Sure, just ask Zimbabwe how that works. A loaf of bread ended up costing $100 billion before they said "ok, this isn't gonna work anymore."

So when is our day coming of $1000 loaves of bread?

 

[cubby1223]

So when is our day coming of $1000 loaves of bread?

In Saudi Arabia oil accounts for 55% of their gdp, 90% of their exports, and 93% of government revenues.

The U.S. does not have an economy that heavily dependent on one resource, let alone a non-renewable resource like Saudi Arabia has.

 

[Attic]

In Saudi Arabia oil accounts for 55% of their gdp, 90% of their exports, and 93% of government revenues.

The U.S. does not have an economy that heavily dependent on one resource, let alone a non-renewable resource like Saudi Arabia has.

QE is currently that resource, albeit renewable.

 

[Doppel]

Tough shit for Saudi. A one-trick pony like much of the region, unable to really produce anything that isn't right under their feet (and use foreigners to get it, too).

The US has had enough of OPEC and it is as mentioned increasing domestic energy production at a solid clip. Oil is still imported to a large degree but when other energy sources are considered the US is in fact in very good shape at the moment.

Cubby's numbers are a bit off--CIA says 45% of GDP and 80% of gov revenues are from oil but even those numbers spell doom for the country should prices drop much or for long.

 

[DucatiMonster696]

It doesn't matter as US consumption trends with regards to gasoline has been on a steady decline in regards to the use of gasoline for cars, thus oil as auto technology has improved over time. Since the first mass produced car was launched technology has slowly but surely improved the MPG for automobiles via technological advances over the decades.

So if you compare a new car today (especially the most popular hybrid model the Prius) with one from 30 years ago you'll see that new cars use far less gasoline then older cars and this is without EPA regulations forcing MPG improvements on automakers.

That trend while creeping at times is not going away as technology marches forward and automakers seek to compete against each other on MPG standards. This is why many states are planning for a time when gasoline sales will no longer be enough to fund the maintenance of their local roads as consumption of gasoline for automobile use has been on steady decline in the US. As for Saudi Arabia and the rest of the Middle-East OPEC nations well they can go suck an egg if they haven't prepared for the day that oil sales will eventually not be enough to sustain their governments spending to ease the sting of oppression in the region.

 

[DucatiMonster696]

QE is currently that resource, albeit renewable.

Not really, even the Federal Reserve understands that QE "forever" is not a viable option and would if allowed create more harm than good in the economy. Hell its already proven to of created a inflated stock market dependent of Bernanke QE Bucks trickling in from banks moving that money into the stock market.

 

[StrangerGuy]

It doesn't matter as US consumption trends with regards to gasoline has been on a steady decline in regards to the use of gasoline for cars, thus oil as auto technology has improved over time. Since the first mass produced car was launched technology has slowly but surely improved the MPG for automobiles via technological advances over the decades.

So if you compare a new car today (especially the most popular hybrid model the Prius) with one from 30 years ago you'll see that new cars use far less gasoline then older cars and this is without EPA regulations forcing MPG improvements on automakers.

That trend while creeping at times is not going away as technology marches forward and automakers seek to compete against each other on MPG standards. This is why many states are planning for a time when gasoline sales will no longer be enough to fund the maintenance of their local roads as consumption of gasoline for automobile use has been on steady decline in the US. As for Saudi Arabia and the rest of the Middle-East OPEC nations well they can go suck an egg if they haven't prepared for the day that oil sales will eventually not be enough to sustain their governments spending to ease the sting of oppression in the region.

Ah, the mighty OPEC that once held the world at ransom by threatening to cut off their oil supply? How the tables have turned. And I can imagine the extent of state mismanagement when the economic and societal conditions of commoners are still so crap despite all the massive subsidies from oil.

 

[sm625]

God the ignorance. The US isnt anywhere near energy independent. We still produce only half of what we consume and thats not going to change despite the crack pipe being passed around in the media. Oil prices arent falling either. The only reason imports are falling is because total US consumption has fallen around 10% in the last 5 years. Our economy has contracted significantly... Imports have dropped far more than production has risen. Outright collapse is not a bad word to describe what is happening, at least from a historical sense.

US oil production will not return to where it was in the 1970s or even the 1980s. All the sweet spots in places like the bakken have already been peppered with ridiculously expensive wells.

 

[Attic]

Not really, even the Federal Reserve understands that QE "forever" is not a viable option and would if allowed create more harm than good in the economy. Hell its already proven to of created a inflated stock market dependent of Bernanke QE Bucks trickling in from banks moving that money into the stock market.

It has certainly created gross misallocations of capital and goods by creating inefficient markets, but in so far as QEforever is only not continious in that it will actually stop, it is a viable piece of the market and not a manipulated one should QE continue for a long period of time.

The manipulation would be, IMO, cemented in it's true effect only if QE ends. That would be catastrophic given where fundamentals were before QE and where they are now. Only slightly better despite massive gains in equity markets.

I'm arguing from the point that QE will not end which I realize is unlikely given the dangers of keeping it going long term. I'm just not seeing anything that would allow for an exit within the next 12-24 months. In so far as QE was needed in each of its iterations, it will continue to be needed for the forseeable future. When I listen to Ben this is what I gather from him at least.

Basically, it's the status Quo until it's not.

 

[ivwshane]

It doesn't matter as US consumption trends with regards to gasoline has been on a steady decline in regards to the use of gasoline for cars, thus oil as auto technology has improved over time. Since the first mass produced car was launched technology has slowly but surely improved the MPG for automobiles via technological advances over the decades.

So if you compare a new car today (especially the most popular hybrid model the Prius) with one from 30 years ago you'll see that new cars use far less gasoline then older cars and this is without EPA regulations forcing MPG improvements on automakers.

That trend while creeping at times is not going away as technology marches forward and automakers seek to compete against each other on MPG standards. This is why many states are planning for a time when gasoline sales will no longer be enough to fund the maintenance of their local roads as consumption of gasoline for automobile use has been on steady decline in the US. As for Saudi Arabia and the rest of the Middle-East OPEC nations well they can go suck an egg if they haven't prepared for the day that oil sales will eventually not be enough to sustain their governments spending to ease the sting of oppression in the region.

I didn't even think of that! That could explain why a lot of states don't push for or want higher standards for mpg.

Thanks!

 

[Ventanni]

When discussing this topic, we need to remember that energy independence does not equate to oil independence. The US has large reserves of coal, but dwindling supplies of oil.

 

[Fern]

I think this is more about welfare/social spending than oil prices. Seems people everywhere have their hands out and expect their govt to give them things for free.

So sure, if your economy is heavily dependent on oil revenues the handouts slow down or stop when oil revenue falls. But it's the same for other countries when they run into budget problems and have to cut the benefits. Greece is a good example; when they cut the benefits both the Left and Right were rioting in the streets. Greece has no oil.

Maybe it all says something about the long-term viability of the political strategy of offering these benefits to win votes; It's unsustainable. Can a political party built on free handouts survive in the long term?

All good things must come to an end. Countries, like companies, who offer just one product and don't change/grow/diversify will die out.

Fern