Oil Prices Fall 77%

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It’s cold and freezing here in Colorado, but at least the sun is out. Your editor spent most of Saturday in transit, via Los Angeles and then Denver, where we arrived during a windstorm.

Here in Colorado you’ll find the same stories that preoccupy Aussies: the share market, the property market, and jobs. Fuel prices are down. But the animal spirits that animated markets and people just a few years ago are visibly subdued. It could also be that the cold has frozen everyone’s facial muscles.

You’d also think that the 77% fall in oil prices from their all-time high would be unmitigated good news for consumers and the economy. But that is especially not the case in energy states like Colorado. High oil prices meant increased exploration and production for coal, gas, and oil.

Now, the big oil majors are re-thinking projects. Projects that made sense with the oil price at $90 now make a lot less sense with the oil price hovering above $30. Thus you have the irony that lower oil prices will lead to more consumer use but less major production. Lower prices, then, will accelerate the rate of depletion in proven oil supplies but not ad substantially to the search for new elephant fields.

That doesn’t sound good does it?

What else? People are buying at the big box retail outlets, reports your editor’s sister. She’s taken a part-time job at one of them. Her husband works in the mortgage department at Wells Fargo. She reports that people are buying, but mostly food.

“Lots of bulk food items. Batteries, water, those sorts of things. And they’re paying cash.”

We’ll have more to say tomorrow after we get settled in. For now…over to….

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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