It is a slow time of the year in the USA and other locations that celebrate Christmas and New Year's in the last week of the calendar year. But, despite the lack of investment activity, the oil market continues its slide. A barrel of oil closed yesterday at $52/per. This is good news for some, bad news for others.
We have discussed this price drop and its effects before- there are winners and losers. The winners continue to be drivers/consumers of energy at retail- prices at the pump continue to go down. This bodes well for retail merchants dependent upon spending by consumers for cash flow and profits. Also big winners: airlines, where fuel costs represent a high % of expenses. Oil producers and drillers and servicers will see profit declines as cutbacks in drilling operations and reduced exploration follow price declines.
Then there are national losers: those sovereign states that are dependent on oil and gas for their country's budget health-think Russya, Iran, Kazakstan, Saudi Arabia, Nigeria, and UAE. All will see income reductions through 2015 and beyond. The big winner: Uncle Sam and his USA. Now, a net exporter at a time when GDP is growing at a 3.5% annual rate. Russya is projecting a recession or worse in 2015, Venezuela is on the brink of depression and/or revolution. As part of the fallout, Cuba is cozying up to its northern neighbor across the Florida Strait. The average price of a gallon of gas int eh US is $2.40! Down almost $1 since June of this year. Even I feel better about my personal finances. I love to watch the final figures on the gas pump substantially lower than just 6 months ago.
These conditions are likely to persist, and in many cases, will be the only pay increase for many workers. Or a tax break, depending on how you look at it.
Go to Tahoe this week; go skiing- weather is great!.....
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