Low oil prices are not a benefit, but a blow to the United States. Furthermore, the low quotations of black gold make increasingly uncertain future of the American economy. Such statements are made not just anybody, but the American scientists and economists.
“It is believed that low oil prices have always been the engine of the U.S. economy. However, the drop in prices in the last two years have led to contradictory situations when problems may occur throughout the state,” scientists believe the Miami University rocky Newman and John Baublis. And they are not the only American specialists who adhere to this position.
Minus 70 thousand jobs at stake — 10 million
Previously everything seemed simple: it was cheaper than fuel, the more Americans spend on other goods. Thus, contributing to the economy. Now, in theory, everything should have happened in the old scenario, said rocky Newman and John Baublis. At the current price of oil and gasoline the average American family will save on one machine 1200-1500 dollars a year. With an average annual household income of $ 55 thousand is not so little. Dropped due to reduce the cost of production and delivery, and the prices of many products and commodities. Therefore, the effect of consumption growth, in theory, should be even more impressive.
However, this is unlikely to happen in the entire country, suggest researchers of the University of Miami. “Over the past 10 years, the US has turned from the importing country in mining. Moreover, oil production exceeds domestic needs and gas is a little below the level of consumption,” notice rocky Newman and John Baublis. Therefore, they conclude, the fall in prices below cost levels leads to the fact that residents of States that depend on extraction of hydrocarbons, was under attack. In March production has fallen below last year’s level and, for example, oil service companies Halliburton and Schlumberger has already cut a quarter of staff. Just the oil and gas industry the USA on the street was 70 thousand specialists. And the end is not yet. With this industry connected 10 million jobs notice rocky Newman and John Baublis. Therefore, if the people of East and West coast are benefiting from the low oil prices, then in Texas, Louisiana, North Dakota, Wyoming and Alaska already lose. These States are already on the path to recession.
Banks will lose hundreds of billions of dollars of depositors
Scientists at the Miami University rocky Newman and John Baublis believe that is not over yet and the worst for US can still be found. While the situation save the hedge funds that insured future risks and oil producing companies to repay the difference from lower prices. However, hedge contracts do not last longer than a year or two and a half extracting shale oil and gas companies is already on the verge of bankruptcy. And if oil prices remain at a low level, the knockdown can be us banks that will affect all Americans.
“Get the same bubble, as with real estate investments due to the crisis of 2008. After banks were looking for new opportunities for investment and funding of local mining companies on hundreds of billions of dollars. In the case of the deterioration of the situation can’t wait for their return. Thus, and millions of ordinary depositors will be left without money,” noted rocky Newman and John Baublis. As evidence they cite the fact that the financial conglomerate JP Morgan and the banking company Wells Fargo has already written down $ 2.5 billion of loans at a loss.
A blow for the environment: plastic from petroleum is cheaper than recycled
Part of the American scientists are sounding the alarm: low oil prices will also affect the ecology, and the promised reduction of greenhouse gas emissions will turn into a utopia. If a couple of years ago the production cost of “green” energy was a bit more expensive than hydrocarbon, now costs differ significantly. Suffer even such sectors as waste recycling. At current prices, the oil companies became profitable to purchase products from primary raw materials instead of recycled waste. If a year ago, for example, the largest American company on recycling Waste Management received for each bale of recycled plastic translucent 230 USD, now it gives not more than 112. “Profit is no longer our profile,” sadly remarked to journalists The New York Times CEO David Steiner. During the year, Waste Management was forced to reduce the number of its stations on a quarter — to 100. And so deplorable is the situation with the entire industry. At the end of last year in Alabama was closing the waste recycling centre, which was built for $ 35 million and just two years ago. Large company United Plastic Recycling declared themselves bankrupt, and the Plaquemines Parish of New Orleans raised the rates for garbage collection twice. But since they turned out to be unaffordable for local administration, the company is finalizing the end of the month, despite public outrage.
The impact on processors was transparent and was also on the local authorities. They earned on what was sold to companies used cardboard, aluminum cans and plastic bottles. And now have to pay for their removal. For example, last year the authorities of Washington had paid Waste Management $ 1.3 million, while in 2011 earned on the sale of cardboard, plastic and aluminum $ 500 thousand.
The world turned upside down: he, too, there is no benefit from cheap oil
If the U.S. benefits from lower oil prices be a myth, then no benefits will receive and the global economy. “Today, many became supporters of cheap oil. Like, people will spend more on other goods. Supposedly it’s good for the global economy. However, in the present case, everything will be exactly wrong. Many simply do not understand what is happening and why,” — said the expert of the international research firm ICIS , John Richardson. “First, we need to understand why prices fell for oil. Because overproduction is associated not only with production but also with the current and future consumption. And one of the main reasons was the cessation of stimulation of the Chinese economy. Without it, problems in the global economy began in 2008-2013. Secondly, the future demand, which including was due to the increase in production. As everyone knows, China will soon become the country’s middle class. But in this myth is believed, and the Western banks have reduced interest rates on deposits to a minimum and people invested in developing countries. If you combine these two reasons together, it appears that one leg we are already in a global economic crisis. And, in fact, received in China the same bubble as was in the U.S. in 2008. If we add to this an aging population, we will have all that consumption has decreased, not increased”.
Further — more, the expert continues ICIS: “countries Such as India and Indonesia provided subsidies for fuel. And as it fell, subsidies abolished. That is, one and a half billion people do not have more money to buy. In addition, ecology. In China, which suffers from air pollution, impose strict limitations on the consumption of oil. That is, benefits from cheap oil is also not worth the wait. Finally, low oil prices already hit by the large producer countries — Saudi Arabia, Russia, Nigeria and Venezuela”.
All together, according to John Richardson, gives no reason to believe that low oil prices will play a positive role in the development of the global economy.
Oil prices will save the oil companies?
Most analysts agree that this year the price of oil will stay between $ 30. Plus or minus 10. And when she will grow even more, nobody knows. As we already wrote, in the struggle with shale oil Saudi Arabia is not going to give in and reduce production. Moreover, the Kingdom is planning not just to bankrupt American companies, but also to discourage any investor anywhere to invest in shale projects. And how much it will take time, unclear. Shale company, in turn, are affected, but not going to give up and even add fuel to the fire. According to Reuters, the head of the largest shale companies Rival Continental Resources and Whiting Petroleum announced that it was ready to restore and increase production at an oil price of 40-45 dollars. Supposedly the technology has allowed to reduce the cost. Analysts doubt it, considering that the cost is deliberately underestimated by at least 10 dollars. For Saudi Arabia, however, is also caught in a difficult position because of declining prices, the threat alone is enough to keep oil at a minimum price.
And how safely assume some American analysts, to do this they will not so long. “Save” the situation oil Corporation, says U.S. energy expert Kurt Cobb. “The bankrupt shale companies will lead to the fact that they will start to buy oil Corporation. They will develop new assets, but very slowly. And this they have two reasons. First, the giants no problem with the money to repay the loans. Secondly, they suffer from low prices and are keen to put shale projects in “pigeonholed” for the sake of profit still.
The main obstacle, according to the expert, is that other investors realize what’s happening. Shale companies have already begun to sell assets, but not at the prices that will attract corporations. And now suddenly investing your investments is far from industry investors. There are those who for some reason believes, writes Kurt Cobb that the bottom has been reached and hopes for a speedy growth. However, in their case it is not, they will be nakazany, concludes the economist and adds: “However, the rise in the price for this is once again postponed”.