If there is any single price of any commodity that determines the growth or slowdown of our economy, it is the price of crude oil. Too many things don’t calculate today in regard to the dramatic fall in the world oil price. In June 2014 major oil traded at $103 a barrel. With some experience following the geopolitics of oil and oil markets, I smell a big skunk. Let me share some things that for me don’t add up.
In 1748, as part of the Treaty of Aix-la-Chapelle, France regained Cape Breton from Great Britain. The island, off the coast of Nova Scotia, had passed back and forth between the two countries over the years, and previous treaties had been as binding as toilet paper. But as part of the 1748 treaty, Great Britain sent several British peers to Paris as a guarantee of the British king’s good faith in the latest agreement.
Historically, low oil prices have been perceived by many as an overriding positive for the economy. This has especially been the case in the United States where most households rely on car travel as a primary means of transport. Low oil prices allow households to spend more on economic activities other than gasoline and other oil-related expenses. Historically, every time the oil price soared — such as the 1973 oil crisis, the 1991 Gulf War, and in 2008 when oil reached a historical high of $147 a barrel — public opinion always regarded these events as a serious threat to the economy.