The sharp fall in worldwide oil prices is a silver lining with a silver lining, even if the linings are a bit tarnished. The price of the world’s most widely-used commodity has fallen sharply over the last five months, from a spot market price of $115 per-barrel in late June to $77 last week. For consumers everywhere, that means major savings that will mainly go to purchase other goods and services; and those boosts in demand should spur more business investment. So, if low prices hold for another six months, analysts figure that growth in most oil-consuming and oil-importing countries could be one-half to a full percentage-point higher than forecast, including here in the U.S. and in the EU, China and Japan. It’s a blow to the big oil-producing and oil-exporting nations; but the global economy will come out ahead. After all, the U.S., EU, China and Japan account for more than 65 percent of worldwide GDP, while the top ten oil exporting countries, led by Saudi Arabia and Russia, make up just over 6 percent.
The hitch for this rosy scenario is that much of the revenues that OPEC countries now won’t see would have gone into financial and direct investments in the U.S. and EU. That means that new investments in American and European stocks and bonds could be reduced by some $300 billion per-year. The upshot may be slightly higher interest rates and slightly lower equity prices, which would dampen the growth benefits of lower oil prices.
The lower prices are driven mainly by supply and demand, but market expectations and some strategic maneuvering by Saudi Arabia play a role, too. Yes, worldwide oil supplies are up with rising production from U.S. and Canadian tar sands and shale deposits, and Libya’s fields are fully back online. Moreover, these supply effects are amplified by softness in demand for oil, coming from economic stagnation in much of Europe and Japan, China’s slower growth, and our own increasing use of natural gas. Oil prices also are influenced, however, by the prices that buyers and sellers expect to prevail months or years from now. Last week, when the “spot price” of crude oil was about $77 per-barrel, the price for oil to be delivered next month was almost $10 lower. In fact, the world’s big oil traders see crude prices continuing to decline not simply into 2015, but for a long time: The price for oil to be delivered in mid-2016 is less than $72 per-barrel and, according to these futures prices, not expected to reach even $80 per-barrel until 2023.
Don’t count on a decade of cheap oil. Yes, technological advances have brought down the cost of extracting oil from tar sands, shale and deep water deposits, as well as the cost of producing and transporting natural gas. But the economics of these new energy sources work best at prices higher than those prevailing today. A long period of low oil prices would slow the growth of supply from those sources -- and so drive oil prices back up. The Saudis are counting on it. They’ve refrained from cutting their own production, which could restore higher prices, in hopes that another year of low prices will slow down investments in all of those alternatives sources.
The truth is, oil prices will rise again whether the Saudis’ tactic works or not. While the outlook for much stronger growth remains slim for Japan and much of Europe, an extended spell of lower energy prices will support higher growth here, in China, and across many of the non-oil producing countries in Asia, Latin America and Africa. Stronger growth and energy demand will bring on line more alternative sources of energy -- so long as oil prices are high enough for the alternatives to be competitive.
This is an old story. Oil prices fell, and as sharply as they did this year, in 1985 and 1986, in 1997 and 1998, and in the aftermath of the 2008-2009 financial upheavals. Each time, oil prices marched up again after one, two, or at most three-to-four years. Of course, that volatility also makes some people billionaires. To join them, what you’ll need is patience and a hedge fund’s access to credit. With that, all you do is go out and purchase a few billion dollars in contracts to take delivery of crude in 2018 or 2020 at today’s futures prices, and then dump the contracts when oil prices once again head north of $100 per-barrel.
This post was originally published on Dr. Shapiro's blog.
NDN is joining with millions of others in enthusiastic support of the bold steps the President has taken to improve our antiquated immigration system. Our team has been at the front lines of this consequential debate for many years now, and offers this roundup of our recent and most important work in this area including recaps of events we've hosted with DHS Secretary Jeh Johnson and the Deputy Secretary of DHS, Alejandro Mayorkas:
2014 has already been a great year for jobs growth, with the economy picking up steam and each month this year averaging over 200,000 jobs. Perhaps, it wasn’t surprising that we would end the year on a strong note. The Bureau of Labor Statistics reported that the U.S. Economy added over 320,000 new jobs during the month of November, the highest single monthly report since January 2012. In addition, the report revised the data from September and October to include more than 44,000 additional new jobs.
The unemployed rate held steady for November at 5.8%. Over the past year, the unemployment rate decreased by 1.2 percentage points. Additionally, wages ticked up slightly by .4 percent--the most since June 2013. This news, along with strong GDP growth and high consumer sentiment, continues the string of positive recent economic news.
Earlier this year, I wrote about new data which suggested that the Affordable Care Act (ACA) was positively impacting the American Healthcare System. In particular, reports at the time highlighted the fact that the law was completing its primary objectives: decreasing the number of uninsured, bending the healthcare cost curve, and slowing the growth of premiums.
This week multiple reports point to the continued successful policy implementation of the ACA. A report released by the Urban Institute on December 3rd, estimated that in the first year of the ACA, the number of uninsured decreased by 10.6 million—about 30% of the entire uninsured population. The Centers for Medicare and Medicaid Services reported that in 2013 National Healthcare Expenditures only grew by 3.6%. While still an increase, this rate was below the historical growth rate of healthcare costs. In fact, the last four years have had the slowest growth in healthcare spending since the Center began measuring this information in the 1960s.
The Department of Health and Human Services also released new information that suggested another goal of the ACA, making the system as a whole work better, is moving forward. Sarah Kliff of Vox.com has a good take on the HHS data that found that ACA programs contributed in reducing hospital errors; this action resulted in saving about 50,000 lives over a four-year period. Infections acquired in hospitals decreased by over 17% since 2010.
The next phase of open enrollment for the market exchanges is also off to a great start. In the two weeks since open enrollment began on November 15th, over 760,000 people have signed up for plans. This is a large turnaround from the initial launch of Healthcare.gov where just a little over 100,000 people were able to sign up during the entire first month. Open enrollment will continue until the middle of February 2015.
Though the first year of the Affordable Care Act has not been without flaws, we are beginning to see the healthcare system change in a profound way. Whether it’s reducing costs at large, helping improve hospitals, or decreasing the uninsured, the ACA has started to impact the system in the way that its proponents had intended.
For over nine years, NDN has been a leader in the fight to reform our immigration system. Last week, the President and his team took an historic step forward in improving this anachronistic system, a step that in its own way broke the “gridlock” on an issue of critical importance to our country. As I wrote in US News, the President’s Executive Actions will help grow our economy, better public safety and improve border security. These actions are clearly in the national interest of the United States, and are the kind of bold, ambitious acts we expect from our President. I was fortunate enough to be in a small meeting with the President a few hours before his Thursday night speech, and I can tell you he and his entire team have the passion and commitment to see these important actions through to their successful implementation next year. This powerful commitment was something we also felt in our discussion with DHS Secretary Jeh Johnson at an event we hosted on Wednesday, the last major event the Administration held prior to the President’s announcement on Thursday night.
As prominent immigration attorney, David Leopold, and I wrote on MSNBC.com, the political fight over these actions really only began last week. There will be opposition that will need to met head on, and a lot more work to be done. We are taking stock of the current state of play, and evaluating the best way for us to add value in the critical months ahead. If you have suggestions for us, please let us know.
What I really want to say, however, is thank you. Thank you for your financial support, your hard work, and your words of encouragement and challenge during this long hard fight. I am proud of the leadership role we’ve played in what has been one of the more consequential and roughest policy and political fights in Washington over the past decade. While our work is not done, I hope you will savor this moment. Together we’ve fought for policies which will, in a very short time, bring dramatic improvement to the lives of millions of striving, immigrant families. We are a better, more just and safer national today because of these actions. Big steps like these is why many of us do what we do, and while this fight is not done, a big thank you from the DC office for helping make these historic actions possible.
Thank you again, and all of us I think have a bit more to be thankful for this coming Thanksgiving weekend.
Secretary of the Department of Homeland Security, Jeh Johnson, spoke on November 19th about the Obama Administration’s Border Enforcement and Immigration Record at an NDN event. The event took place in Washington at the National Press Club in the main ballroom.
NDN President Simon Rosenberg introduced the Secretary. Simon spoke about important strides that the Department of Homeland Security had made by using prosecutorial discretion and the “Morton Memos” to make the immigration system safer, stronger, and work more efficiently.
If you missed the event, you can watch it in full on CSPAN.
Numerous media outlets covered the event, including the Washington Post, Huffington Post, NBC, and more. You can find a full list of press links below:
When it comes to understanding the U.S. Economy, there are many different ways that experts, pundits, and policy makers attempt to measure progress. Some look at the monthly jobs report as the key indicator; other suggest that median wage income ought to be the new guiding light. Consumer sentiment might also be a good way to measure how people at large feel about the economy.
The Consumer Sentiment Index, taken by Thomson-Reuters and the University of Michigan, is a five question survey that aims to capture the mood about current economic conditions. The survey asks the taker about the conditions of their family’s income, whether they are better or worse off, and if businesses and the economy at large will be better off next year.
This month, the survey found consumer sentiment at 89.6, which was the highest rating since July 2007. Despite positive feelings about lowering gas prices and the lower unemployment rate, many still felt like their income would not improve by much in the coming year. Still, this month’s report was on the whole good news. Consumer Sentiment took a major hit even before the financial crisis of 2008, when the initial recession began in late 2007. During the Debt Ceiling negotiations of 2011, Consumer Sentiment took another dive after the fear that the US might default on the national debt. Afterwards, it has slowly inched back up and made gains over the past year—finally returning to high levels after seven years.
On November 19th, Simon joined a conversation on the future of the Internet and Mobile Technology. The event took place at the Ronald Reagan Building (1300 Pennsylvannia Ave Entrance) in Washington, D.C.
The event started with a conversation moderated by Jonathan Spalter (Chair of Mobile Future) and FCC Commissioner Ajit Pai. Afterwards, Simon joined a panel with Julie Diaz-Asper (Social Lens Research), Professor David J. Farber (Professor at Carnegie Mellon University/Former FCC Chief Techonlogist), and Professor Emeritus Gerald Faulhaber (Wharton School, University of Pennsylvania/Former FCC Chief Economist).
You can find an archived video of the event at Mobile Future's site. In addition, be sure to check out Simon's piece written with Jonathan Spalter in the Hill, entitled: "Fighting to Keep the Internet Open and Free."
Last week, NDN’s President Simon Rosenberg once again took part in the Hill’s election prediction contest. As a winner in 2012 and 2008, Simon hoped to keep the momentum going and take the midterm election contest as well. Unfortunately, Simon’s crystal ball was a bit foggy this year—and so his predictions were a little off.
Congratulations to Grover Norquist, president of Americans for Tax Reform, on his 2014 Hill contest win.
Despite the loss, Simon looks forward to the opportunity to keep his presidential election winning streak going in 2016. Until then, we encourage you to read Simon’s post-election memo and keep an eye on day-to-day thoughts on Twitter (@SimonWDC).
At the core of the coming debate over Executive Action will likely be a discussion of prosecutorial discretion and/or the “Morton Memos.” The use of this power is what created DACA; it is something the entire GOP House voted on to repeal twice in the current Congress; and will likely provide the legal basis of what the President does next. Much of our work this past year has been in documenting how much change the Morton Memos brought to the immigration and border enforcement system over the past several years.
We conclude that the way the Administration has already used P/D has helped make our border safer, kept the net flow of undocumented immigrants into the US at zero and improved public safety by prioritizing the removal of undocumented immigrants with criminal records from the interior of the country. It has also been humane, as the number of people deported without criminal records or caught entering the country illegally has fallen to very low levels. It has been smart and successful policy, providing the President with a strong foundation on which he can take additional action.
For more on this see our assembled resources below.