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Title: The Real Price of Oil Is Far Lower Than You Realize
Source:
soso
URL Source: http://www.bloomberg.com/news/artic ... -spending-cuts-and-even-smiles
Published: Jan 15, 2016
Author: Grant Smith, BloombergBusiness
Post Date: 2016-01-15 14:21:03 by SOSO
Keywords: None
Views: 1259
Comments: 10
The Real Price of Oil Is Far Lower Than You Realize
by Grant Smith January 13, 2016 — 5:01 PM MST
Updated on January 14, 2016 — 1:54 AM MST
While oil prices flashing across traders’ terminals are at the lowest in a decade, in real terms the collapse is even deeper.
West Texas Intermediate futures, the U.S. benchmark, sank below $30 a barrel on Tuesday for the first time since 2003. Actual barrels of Saudi Arabian crude shipped to Asia are even cheaper, at $26 -- the lowest since early 2002 once inflation is factored in and near levels seen before the turn of the millennium.
Slumping prices are a critical signal that the boom in lending in China is “unwinding,” according to Adair Turner, chairman of the Institute for New Economic Thinking.
Slowing investment and construction in China, the world’s biggest energy user, is “sending an enormous deflationary impetus through to the world, and that is a significant part of what’s happening in this oil-price collapse,” Turner, former chairman of the U.K. Financial Services Authority, said in an interview with Bloomberg Television.
The nation’s economic expansion faltered last year to the slowest pace in a quarter of a century.
“You see a big destruction in the income of the oil and commodity producers,” Turner said.
Saudi prices would be less than $17 a barrel when converted into dollar levels for 1998, the year oil sank to its lowest since the 1980s.
The benefit for consumers from historically low oil prices is being blunted by changes in fuel taxation and a reduction in subsidies, according to Paul Horsnell, head of commodities research at Standard Chartered Plc in London.
“But it certainly shows that current prices are very low by any description,” he said.
Poster Comment:
Deja vu all over again? Don't think so. Is this really being driven by supply conditions? I don't think so.
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Begin Trace Mode for Comment # 5.
But it certainly shows that current prices are very low by any description
If they are so low how come it hasn't translated to 1998 prices at the pump, the oil companies are still getting rich charging us 2013 prices. This is all smoke and mirrors as Saudi and the US try to beggar Russia. The only impact China has is a lessening of domestic demand
#5. To: paraclete (#2)
This is all smoke and mirrors as Saudi and the US try to beggar Russia.
For a number of years Putin was imploring Russian business and administrative leaders to wean country from dependence on export of resources and on import of food. Now is a golden opportunity to do just that and to restructure economy.
Replies to Comment # 5.
Now is a golden opportunity to do just that and to restructure economy.
Not only for Russia. The Russian economy is really small in comparison with other nations and is hurting from low energy prices but Europe is vulnerable being too dependent on Russian energy. The expenditure Putin is putting into Syria is a smoke screen to cover the internal problems. The Russian bloc is just 3% of the world economy
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