18 October 2008

Oil prices are dropping -- the sky is falling

Anja Merret puts her finger on something that has been puzzling me recently too: why we are told that falling oil prices is a sign of depression. Six months ago we were told that rising oil prices would increase the cost of basic goods and services, and make the poor poorer. Suddenly it's become a Bad Thing, in media reporting, at least.

anja merret - chatting to my generation � Hollywood has moved to Wall Street:
During the past months the media has been reporting that the USA and UK are in a recession. However, since mid September ‘Father Christmas’ came early for the media, as the ‘Credit Quake’ took over. It was a much greater disaster to ride and make headlines with than with something as silly as a recession.

This is how it went, more or less. The financial markets took a huge tumble. Bad lending practices as well as some nasty rumours led to a few banks pleading poverty. Liquidity crunch was the reason given for this. Bad management decisions might have been a reason as well, one wonders. So the governments of the developed world pumped money into the affected banks and the financial market at an astonishing rate.

Then the oil price fell from an economy killing high of just under $150 per barrel. It’s now fluttering around the $80 mark. Suddenly this was bad news. Really? This tumbling oil price, from levels only supported by the greed of the oil traders and producers, was perceived to be a disaster. What? It’s almost unimaginable to think that anybody would consider a falling oil price to be bad news.

I think Anja Merret has put a finger on something that has puzzled a lot of people; well, it certainly puzzled me.

I'm all in favour of reducing dependence on fossil fuels, and finding alternative sources of energy. Finite resources will not last for ever, and when they're gone, they're gone. So when oil prices doubled earlier in the year, I thought that might be taken as a salutary reminder of the urgency of the need for finding alternative energy sources.

But, as Anja Merret points out, it is suddenly, in some quarters at least, being interpreted as sending a quite different message, and one wonders why.

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