WASHINGTON – Western financial and business publications are now celebrating the collapse of oil prices. This unexpected Christmas gift is certainly a nice surprise. Lower oil prices mean lower gasoline prices. And in countries where people drive a lot, like the US, lower prices at the pump have the same effect of a tax cut, or of a nice bonus in your pay check.
More money to spend
And, of course, less money spent on gasoline means more disposable income that can be spent on Christmas shopping and/or other things. As our Western economies are largely fueled by consumer spending, this is good news for retailers and for anybody else producing and distributing goods and services that appeal to millions.
Thank the Saudis
So, cheer up and say thanks to Saudi Arabia, and to its “keep the taps turned on” policy that is at the root of the over-supply that has caused oil prices to collapse.
Look, there is nothing wrong in celebrating a bit of good luck. But this is what it is: luck. This relief at the pump we are enjoying now has nothing to do with improved economic policies in Europe, or in Japan. So, let’s not get carried away.
This is the only good news
Indeed, I am concerned when I see that lower oil prices is essentially all the good economic news we have got, these days. Most Western economies are not well. In fact some are doing quite poorly. The innovation drive is gone. There is no meaningful growth. Just look at the Eurozone.
If our (somewhat) improved economic outlook depends entirely on finding ourselves on the right side of an oil price war started by Saudi Arabia in order to preserve its market share, then we are in really bad shape.
Can we enjoy low gasoline prices and still plan ahead?
By all means, let’s pocket the Christmas bonus. Let’s enjoy the benefits of lower gasoline prices.
However, if we were smart, we would think about ways in which we could create new enterprises and new wealth, no matter what the Saudis do, or do not do, to manipulate the price of oil.
The trouble is, I doubt that we are smart enough.