By PAT WATSON
Remember when it seemed the whole motoring world was turned upside down when the price of a litre of gas went above one dollar? Then once that reality sank in, the figure edged seemingly ever upward. Not so these days. This week gas was posted at 92.9 cents per litre and in some places as low as 86.9 cents per litre.
There is a saying in the news business that what is good for business is bad for people and what is good for people is bad for business. The prediction for people is that they will save more than $500 in the coming year if the price of oil continues to go down.
Oil is like the blood that flows through the veins of the world economy. The world has become far too dependent on oil in just about every area of modern life. Any heavy dependency, to the point of not being able to function unless taking in the substance, could be defined as a type of addiction. If the rise or fall in the price of a singular consumer product can have such a significant effect throughout the world, we really are in a tough spot, even as we depend on oil to create all kinds of comforts. We have to ask ourselves: is it really worth it?
It’s easy to think it is when a person is on a bus in Toronto and needs to get to work or to a medical appointment. It’s easy to think so if you have daily use of a gas stove. Certainly, it is easy to think so in the middle of winter when there is a cold weather alert and you are relaxing safely in the warmth of your oil heated house or apartment.
If there was ever any lack of awareness about how much the entire world is tied together, then here again with this oil price drop, we are shown how much we are linked together.
The falling price of oil is related to falling demand in China as that economy has begun to experience a slowdown. Similarly a slowdown has emerged in that other economic powerhouse, Germany. Falling demand leads to falling prices.
At the same time within this picture, Canada and the United States have been increasing oil production over the past decade or more. All those protests about fracking – the technique used to extract oil from shale rock – that have been taking place have much to do with this increase in oil extraction on this side of the planet.
There is a stockpile of oil, and there is more being produced at the moment than needed. Added to that the cartel of petroleum exporting countries, OPEC, decided a couple of months ago not to do anything about the unfolding price fall. This group has reportedly decided that even if oil falls to $20 a barrel, they will not cut production in an effort to raise prices. A barrel of oil which last year was priced at $107.30 is now priced at $56.50. That’s how far it has fallen.
It is important enough an issue that the Canadian prime minister made a public statement blandly stating that there will be some uncomfortable adjustments to be made in response. The question that everyone is asking is how long this trend will hold.
With the U.S. economy still struggling to find its legs, lower oil prices will benefit some. The areas that will suffer most are those directly linked to the oil industry. And, economies that rely on oil export will have difficulty. As such, Venezuela, which is already experiencing political and economic upheaval, will face further turmoil. The government in Trinidad & Tobago is also warning that there will be budget cuts in response the current situation.
Will this play a part in upcoming federal elections due in October? After all, Harper has put a lot of political capital into the oil industry.
A note on waiting for spring…
We are just 52 days away from the Spring Equinox but likely 92 days from feeling like spring. Hang in there, and keep taking your vitamin D.
Pat Watson is the author of the e-book, In Through A Coloured Lens. Twitter@patprose.