The recent sudden crash of oil prices has had a major impact on the world economy, leading to many troubled faces in the international arena. The Russians fear the effects of yet another powerful hit on their economy, Venezuela seems to be considering default and the Americans are weary of the consequences for its young and emerging shale oil industry. And then you have the Middle East, where the smallest match is enough to ignite the largest fire. But are these worries really justified or could good things come out of this ‘crisis’?
The New York Times seem to think the latter: in their 6 December article they argue that the plummeting prices could actually turn out to be a blessing. They quote, among others, Dr. Daniel Yergin, who argues that similar developments in the past have actually turned out to stimulate economic growth.
One of the companies severely affected by the price drop is BP. Still, T. Boone Pickens, chairman of BP Capital Energy, does not seem to be too worried. In a CNN interview with Richard Quest, he explains that according to him the whole thing is nothing more than ‘a commodity market reacting to a lower demand’ and should not be made into anything more. Furthermore, he argues that this presents the perfect opportunity to ‘cut OPEC out’ of the US, something he has been advocating for over half a decade through his ‘Pickens Plan’.
Above all, the biggest winners of it all seem to be us: the average Joe who sees the prices at his or her local gas station getting lower and lower, and business owners who get welcome cost cuts on oil-related expenditures.
All in all, it seems to be a game of winners and losers, although both camps are not yet perfectly identifiable. And as the past shows, the oil market has the nasty habit of jumping from one extreme to the other. Therefore, we will have to wait and see who will come out of this plunge a king and who a peasant. Meanwhile, enjoy the falling number on your receipt next time you fill up your car, it might not last very long.
What do you, the risk professionals of the world, think? Are the negative impacts of the recent developments regarding oil prices exaggerated and could it actually be a good thing? We are eager to know your opinion. Please feel free to leave a comment!