HappySqurriel said:
The question is, what is the recession going to look like? If we're heading into a time where unemployment is at 10% and inflation is at 10% people's wages are (certainly) not going to outpace inflation and people are going to be much more focused on saving money. It is quite possible that this will result in people buying far more inexpensive goods from China where there is (much) less emphasis on energy efficiency and the environment, which means that the reduction in energy use in North America and Europe will (probably) be outpaced by growth in energy use in China; in particular, if you take into consideration the transportation costs and the increased energy usage of the Chineese people. All in all, this would mean that low energy prices (in American dollars) would be a short term problem because inflation will drive up the price of commodities (in nominal terms) and increased demand from developing nations would increase the price of commodities (in real terms).
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Regarding oil specifically, I believe we'll see a significant drop in demand. People will be commuting and travelling less, some airlines will go bankrupt or reduce service. I think it will affect the whole world including China, once the chain reaction of unemployment starts having effect.
OPEC is already going to cut production by at least 1 million barrels according to reports from several members (the final decision will be made on Friday in a meeting they arranged).
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