Some of the perverse consequences of Donald Trump‘s assault on the US economy via his tariff attack on world trade are continuing to be seen.
One of these arises from the shift in world oil prices, which have fallen significantly in futures trading. In January, prices reached a high of around $78 a barrel for US crude. Now they have plummeted to around $62 a barrel.
Many people might think that this will help offset the inflation that Trump appears intent on creating, and to an extent, that is true if this price is sustained, as it would seem that traders think it might be.
There is, however, another quite surprising consequence. At $62 per barrel, shale oil production in the USA is not economic. Donald Trump might have said "Drill, baby, drill", but no one is going to in the economy that he is creating.
I cannot help but be just a little bit pleased about that. A world without excessive oil consumption is a better place.
Every cloud has to have a silver lining, somewhere.
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We’d be even better off perhaps without futures trading?
Gambling, you mean?
A silver lining indeed Richard. I assume the price is falling because Trump’s deranged policies are expected to bring about a reduction in economic activity around the world. Recession, or given the effect of the Smooth Hawley tariffs in the 30s imposed by another set of US idiots, depression.
Looks like capitalism isn’t too keen on Trumpism.
Won’t tariffs offset this a bit.
If the world oil price is $60 a barrel with a 20% tariff non us oil within the us will be $72. Which means domestic production doesn’t have to be as efficient to make a profit.
But there is no tariff within the US, and it makes very large quantities of its own oil.
The US produces much of it’s own oil. But it also imports quite a lot from Canada, which it has just assaulted. Make your home grown production uneconomic whilst leaving yourself vulnerable to an aggrieved neighbour (the US won’t be able to quickly replace Canadian oil).
You couldn’t make it up.
Exactly like the UK has already done!
What if the next play is an attack on Iran?
With a simultaneous attack on Yemen?
Would the Tump team then claim that the oil in Canada, Mexico and Venezuela are strategic US assets?
What do you think?
Is the drop in oil price not simply a predictor of global recession? In a recession there will be less demand for oil. The alternative hypothesis is that Trump will change direction again once or several times in the next two months so that the markets do not know what to prepare for
Both are possible.