The falling price of oil is good news for American motorists, and it has an extra added attraction: It’s making life miserable for Russian President Vladimir Putin.
Oil prices have fallen nearly 40 percent since June. Retail gasoline prices have plunged to their lowest levels in years, and may continue to fall in the weeks ahead. The lower cost of fuel keeps more money in consumers’ pockets. Companies, ranging from airlines to manufacturers, are reaping big energy savings.
The oil windfall is likely to help the U.S. economy rev up to a 3.5 percent growth rate next year, according to the International Monetary Fund. Solid, consistent growth with low interest rates and little inflation is ideal for encouraging business investment and job creation. That, in turn, should put some upward pressure on wages.
U.S. trading partners in Europe and Asia, recently under pressure from economic slowdowns, also will get a timely boost from cheaper oil.
What’s not to like? Well, there are losers to go along with the winners. ExxonMobil and Chevron Corp., as well as smaller oil-patch companies, stand to make less money when commodity prices fall. People may not necessarily like the energy giants, but they employ many Americans.
North American oil and gas production could come under pressure. The processes that have helped create an energy boom in the U.S. and Canada — mining oil sands and fracking shale formations — tend to be costly. If oil prices settle at low levels, the economics might discourage further investment.
But many oil and gas fields have reduced their costs as they have adopted new technology. North American production shot up 46 percent between 2008 and 2013. Production likely won’t grow that fast in the future if oil continues to sell closer to $70 a barrel than to $100 a barrel, but the improving cost of production could temper a slide.
And then there’s poor Vlad.
U.S. and European officials have imposed economic sanctions to deter Russia from encroaching on neighboring Ukraine and other nations. The sanctions have inflicted some pain on Putin’s economy.
But the recent plunge in the price of crude has done more to leave Putin gobsmacked than all the sanctions put together. The biggest losers in falling oil prices are countries such as Russia that depend heavily on oil revenue and maintain high production costs.
Russia’s Economic Development Ministry recently threw its forecast for 2015 into reverse: Instead of growing 1.2 percent next year, Russia’s economy will shrink by 0.8 percent. Nothing like a sharp recession to curb territorial ambitions.
After Russia, the next most vulnerable oil-producing state is Iran. Then, probably, Venezuela. Americans needn’t shed any tears about those three.
So Americans can relax in their warm homes, maybe go for a long drive and otherwise enjoy a welcome respite from high energy costs. And think about Vlad’s very bad days.
