| <No.557> |
| Plunging Oil Prices Have Unpredictable Impact on Politics, Economics |
The oil market is seeing a production surge from the United States as new techniques dramatically increase oil output, according to La Salle University economic and political expert Edward Turzanski, who spoke via Skype.
"Transforming the world energy market and also playing a consequential role in geopolitics."
That transformation comes as economists say slowing economic growth in Europe and Asia is cutting energy demand at a time of plentiful oil supplies.
That combination is driving down oil prices.
Less money spent on energy leaves families more money to buy other goods and services, boosting economic growth for many nations.
But low oil prices can weaken the economies and the political power of oil exporters like Saudi Arabia, Iran and Russia.
Russia’s economy is already facing economic sanctions to punish Moscow for its role in Ukraine.
An analyst at Strategic Energy and Economic Research says long term low oil prices will complicate Russian President Vladimir Putin's efforts to maintain domestic political power.
Michael Lynch spoke via Skype.
"Longer term, I think the combination of sanctions and weaker oil prices are gonna put pressure on him."
Rising oil production is due to techniques like fracking that collect oil that is missed by other methods, but does so at a higher cost between $50 and $80 per barrel of oil.
High costs and low prices may make these techniques unprofitable, according to Standard and Poor's analyst Peter Rigby.
"U.S. production could start to fall if prices fall below break-even levels for expensive shale oil production, causing drillers to stop drilling."
Renewable energy alternatives to oil will also find it harder to compete for investment dollars if oil prices drop low and stay there.
Lynch says we may be entering a new era of lower energy costs, while S&P's Rigby says oil prices remain volatile and vulnerable to global economic and financial changes.
Jim Randle, VOA News, Washington |
|
|
|
|
