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Started By
Message
Oil crash is kicking off one of the largest wealth transfers in human history
Posted on 2/1/16 at 11:15 am
Posted on 2/1/16 at 11:15 am
quote:
A new note from Francisco Blanch at Bank of America Merrill Lynch, however, puts the oil move into a much bigger perspective, arguing that a sustained price plunge "will push back $3 trillion a year from oil producers to global consumers, setting the stage for one of the largest transfers of wealth in human history."
Blanch and his team already see evidence that the fall in the price of crude is having a positive impact on demand, and say that it could accelerate even further if prices don't pick up.
Says Blanch: "Alternatively in a lower oil price scenario, e.g. if prices were to average just $40 over the next five years which is close to the current forward curve, demand would grow by 1.5 million barrels per day, which is 0.3 above our base case. Finally, at $20 oil demand would grow by an explosive by 1.7 per year on average, 0.5 above the base case, on our estimates."
Meanwhile, in emerging markets, where much of the story of late has been about disappointing economic growth, Blanch still sees huge upside potential in terms of automobile penetration and consumption.
LINK
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Posted on 2/1/16 at 11:17 am to Street Hawk
quote:
automobile penetration
Rule 34 proven right once again
Posted on 2/1/16 at 11:18 am to Street Hawk
Free market economy is a beautiful thing
Posted on 2/1/16 at 11:18 am to Street Hawk
quote:
Francisco Blanch at Bank of America Merrill Lynch, however, puts the oil move into a much bigger perspective, arguing that a sustained price plunge "will push back $3 trillion a year from oil producers to global consumers, setting the stage for one of the largest transfers of wealth in human history."
And those consumers will take that $3 trillion a year and pump it right back into the economy on a wide variety of products and services.
Posted on 2/1/16 at 11:21 am to Street Hawk
I like how this is news, when anyone with a tiny bit of logic and an IQ above 110 could have predicted that consumers would have more money to spend and the demand for oil would rise if the price were low.
This post was edited on 2/1/16 at 11:22 am
Posted on 2/1/16 at 11:21 am to Darth_Vader
If the state doesn't keep adding more taxes on it to prop up government spending.
Posted on 2/1/16 at 11:25 am to Darth_Vader
quote:
And those consumers will take that $3 trillion a year and pump it right back into the economy on a wide variety of products and services.
Isn't the logic of the OT that they will be saving that money for when oil prices go back up?
Or will these consumers be the ones expecting sympathy when they have to change their lifestyle when gas becomes expensive again?
This post was edited on 2/1/16 at 12:27 pm
Posted on 2/1/16 at 11:27 am to Street Hawk
Unfortunately a poor state with a budget heavily dependent upon oil profits isn't going to see a huge benefit from this paradox.
Posted on 2/1/16 at 11:29 am to Darth_Vader
quote:
And those consumers will take that $3 trillion a year and pump it right back into the economy on a wide variety of products and services.
Oilfield baws here claim that people won't spend it and that they'll just save it. I don't believe it.
The money will be spent no matter who has it. Difference is it won't be spent on F350s and truck nuts now.
Posted on 2/1/16 at 11:31 am to Street Hawk
quote:
demand would grow by 1.5 million barrels per day
So in 3-4 years they just cash this little check, and it evens out.
Posted on 2/1/16 at 11:31 am to Bmath
Yeah Louisiana's state budget gonna get hit pretty good unless they jack up taxes.
Posted on 2/1/16 at 11:31 am to Bmath
Thank God.
Posted on 2/1/16 at 11:32 am to Sun God
They don't need to raise taxes. Get rid of state income tax, and raise the sales tax. Then you can profit of consumers.
Posted on 2/1/16 at 11:34 am to AubieALUMdvm
quote:
that they'll just save it. I don't believe it.
LINK
quote:
Approximately 62% of Americans have less than $1,000 in their savings accounts and 21% don’t even have a savings account, according to a new survey of more than 5,000 adults
I don't believe that we will save it either. If its in our pockets, we spend it.
Posted on 2/1/16 at 11:38 am to Cosmo
quote:
Free market economy is a beautiful thing
I understand locals losing jobs isn't so good, but this is what's thrown around when gas is $4.00/gallon so I guess it works both ways
Posted on 2/1/16 at 11:38 am to Bmath
quote:
They don't need to raise taxes.
quote:
raise the sales tax
Uh
Posted on 2/1/16 at 11:40 am to Sun God
I could phrase that better, but my point is that the current taxation system isn't the way to capture additional money from heavy consumer spending.
Posted on 2/1/16 at 11:40 am to Street Hawk
I'm rich, Beeeeoootch!
Posted on 2/1/16 at 11:43 am to Street Hawk
quote:
"will push back $3 trillion a year from oil producers to global consumers,
There's a limit to this train of thought, though. The only way for the world to really benefit in the long run from these lower prices is for the actual costs of extraction to come down substantially. As it stands now, something like 75% of production is more expensive than the current price of oil - i.e. they are losing money to pull it out of the ground. So in that environment, yes, the world gets a one-time wealth-effect benefit from paying less for oil. But if the costs of extraction don't come down, then the world economy is losing it out the other side. Seems likely that prices will have to go back up for any of this to be sustainable.
Posted on 2/1/16 at 11:57 am to Big Scrub TX
quote:
Seems likely that prices will have to go back up for any of this to be sustainable.
Exactly. This isn't so much a "transfer of wealth" as it is a small, temporary windfall due to high supply and lowered demand. If demand creeps back up then sooner or later will the price. Probably by then people are back to a gas-guzzler for every soccer mom and laughing a the thought of carpooling, so the over-correction catches them right in the nuts.
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