In an article this morning, ‘Is there a downside to plunging oil prices?‘, we looked at the potential impact the price drop could have on derivatives, high yield debt and geopolitics!
I have since read an article that expands my list of three issues to a discussion of ten areas of the economy that have the potential to be impacted.
The list is below along with a link at the end to the article that expands and discusses each one more thoroughly.
- If the price of oil is too low, it will simply be left in the ground.
- The drop in oil prices is already having an impact on shale extraction and offshore drilling.
- Shale operations have a huge impact on US employment.
- Low oil prices tend to cause debt defaults that have wide ranging consequences. If defaults become widespread, they could affect bank deposits and international trade.
- Low oil prices can lead to collapses of oil exporters, and loss of virtually all of the oil they export.
- The benefits to consumers of a drop in oil prices are likely to be much smaller than the adverse impact on consumers of an oil price rise.
- Hoped for crude and LNG sales abroad are likely to disappear, with low oil prices.
- Hoped-for increases in renewables will become more difficult, if oil prices are low.
- A major drop in oil prices tends to lead to deflation, and because of this, difficulty in repaying debts.
- The drop in oil prices seems to reflect a basic underlying problem: the world is reaching the limits of its debt expansion.
For a more in-depth discussion of each, please visit Econmatters.com here.
Michael Haltman, President of Hallmark Abstract Service, New York.
HAS is a provider of title insurance in New York State for residential and commercial real estate transactions specializing in the areas of New York City, Long Island and Westchester.
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