Downside of falling oil prices

The World

Today’s Financial Times sums up the global economic news as almost uniformly bad. But there’s hope at the gas pump at least, and this analyst estimates that U.S. consumers will save about $100 billion dollars in 2009 compared to 2008. He says that’s obviously good news but explaining why gas is so cheap right now is bad news: namely that it means weaker demands and a slow down in economic activity. Weren’t experts predicting huge prices for oil a couple months ago? This analyst says depressions and recessions have a way of turning conventional wisdom on its head. The analyst says the increase in oil prices over the last ten years was paid for on credit and it’s still being paid off. Experts also worry that the price drop in oil is taking the pressure of Washington and Detroit to raise fuel efficiency and invest in alternative energy. The analyst also says OPEC countries aren’t looking for more sources of oil because there’s no demand for it, but if the economy caught up and demand rose again, prices would rise dramatically. OPEC is already talking about cutting back on supply but this analyst says that won’t stop the price drop because the demand just isn’t there. So again that’s good news for drivers but that’s not much help considering how bad the rest of the economic news is these days.

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