Can a surplus of gasoline hurt as much as a shortage?
Have you found it a lot less painful—maybe even enjoyable—to put gas in your car with the price of petroleum at recent lows—the same fuel once touted as very limited and likely to run out in a few short years?
Now we have so much gas that trucks are out-selling cars in America by the widest margin since 2005. Surging supplies and declining demand in Asia and Europe, coupled with a stronger dollar, have brought the price of crude oil well below $50 a barrel—a 48 percent drop since 2014. Some experts predict if the price falls to $39 a barrel it will likely fall subsequently to $30. This dramatic drop in price has oil giant BP (British Petroleum) announcing job cuts at the company's North Sea operation this week.
Even as the regular guy or gal who drives a car to and from work is enjoying the lower cost of gas at the pump, plummeting gas prices have real potential to cause havoc reaching global proportions. According to Bloomberg and Citigroup Inc., cheaper fuel "could aggravate political tension by squeezing government revenue and social benefits, Citigroup Inc. analysts said in a Jan. 5 report" ("How $50 Oil Changes Almost Everything," Bloomberg.com, January 7, 2015).
The Russian economy, if current trends prevail, will shrink by 5 percent if 2015 oil prices average $60 a barrel. Half of Russia's state revenues come from energy exports. Further plunge will see the selloff of the Russian ruble, which already fell some 46 percent last year. This is the ruble's worst performance since 1998, when Russia defaulted on local debt. As the ruble collapses, the Central Bank of the Russian Federation has wasted no time imposing an economy-choking interest rate hike to 17 percent, which has consequently sparked big increases in consumer prices. Such a blow to its economy, if left unchecked, could cause Russia to take on the characteristics of a wounded bear.
Current President Hassan Rouhani of Iran was elected on his promise of national prosperity. This promise, however, was based on $72-a-barrel crude—not the current $46.25-a-barrel the market closed at on Thursday, January 15, 2015.
Falling oil prices through 2014 caused a contraction of Venezuela's economy, generating concerns the government could default on its foreign bonds. President Nicolas Maduro told his government to slash the budget even further, which will only add to current social unrest as government programs dry up and disappear. Meanwhile, Saudi Arabia is effectively blocking the cries of poorer members of the OPEC oil exporters to cut production and stop the free fall in global prices.
The Islamic State, without cash reserves, is likely to become hurt worse economically and militarily than established oil-reliant countries. This translates to a likely change in the focus and nature of IS's terrorist operations. Islamic State will likely turn to other long-used cash-generating methods such as extortion and organized crime to make ends meet. It is interesting to note that because its oil came from captured regions of Syria and Iraq, their oil had no legal title. Without a legal title the IS oil has to be sold on the black market at severely discounted prices.
There are likely to be further and broader negative effects if the collapse in the price of crude oil continues as predicted. The negative effects will come in the form of rising social tension and unrest, say experts, especially in countries where oil keeps economies afloat.
The good news is that the ordinary Joe driving to and from work each day is enjoying a market that is oversupplied by a million barrels of oil a day. The Bank of America estimates oil prices will fall an additional 30 percent to an unbelievable $35 per barrel, with option trades predicting the bottom to hit somewhere around $20.
Keep reading Tomorrow's World to learn more—not only about global trends in religion, politics, science and health, but also about how those trends are working together to shape the fulfillment of end-time prophecies that will affect you and your loved ones.