The only good thing about this "almost a recession" is lower gas prices. The danger, though, is that Western countries might be tempted to resort to their former gas guzzling habits. If that happens, and it probably will, consumers will be hit hard again and perhaps permanently.
Back in 2005 when gas prices similarly dipped, Daniel Jester warned in the online Consumer Flow, "Consumers should not get used to lower gas prices". However, they did, and sent gas consumption and prices soaring to new heights as oil-producing countries smelled greater profits. When drivers woke up from their hangover, they realized once again that much of the developed world was subject to not always beneficent influences.
Oil exporting countries like Saudi Arabia, Venezuela and Russia rely on importing countries to boost their consumption so they, in turn, can raise their prices, control production and gain leverage of geo-politics.
Venezuela's Army Patrols Oil Fields
Each country vigorously protects its "black gold". Venezuela's army patrols oil fields; its navy shadows huge tankers, wise since protests against the state-owned Petroleos de Venezuela, S.A. (PDVSA) almost succeeding in ousting President Hugo Chavez. Saudi Arabia and Russia compete with each other as top oil producer. Saudi Arabia, a "swing producer", balances international oil demand with supply.
Abdullah Jum'ah, former President, Director and CEO of Saudi Aramco, the world's largest oil company, complained to Arabian business (www.arabianbusiness,com), "When the world economics are booming, the National Oil companies are expected to meet the upside of petroleum demand irrespective of the potential for downside. However, when the downside occurs, the NOCs are left holding the bag with massive investments unable to generate adequate returns".
In 1998, Joe Sims, president of Mid-Continent Oil and Gas Association representing producers, transporters, refiners and suppliers comments, "Gas prices adjusted for inflation are sobering and fascinating at the same time. And while the consumer is enjoying low energy prices, it is really dire for the industry in the short term". With the cost of gasoline going down, consumers are wondering why the price of food, most of which is transported to market by truck, has not come down. The food industry's explanation is gas prices change overnight; food prices take much longer to reflect transportation costs.
US Industry Would Rise Again
Today's low oil costs should mean industry everywhere has the luxury of lower transportation costs. If there weren't a recession, China, for instance, would be increasing output instead of laying off workers. The hope is lower gas prices may continue until Obama's job creation measures are underway. If so, US industry would rise again. The rest of the world would ascend with it.
On a green note, will the low price of gas stop the people of Utah from lining up to pay 87 cents for enough natural gas to propel a car about the same distance as a gallon of gas. Demand has been so strong at rush hour that fuel runs low and some days people can pump only half a tank.
Consumers Can't Afford New Clothes
The bottom line is cash-strapped consumers can't afford new clothes, heating fuel or Christmas gifts, but they take solace in putting their feet to the pedals of their trucks and SUVs, ridding themselves of some of their frustrations with the economic mess.
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