Oil Down to $45 – And What It Means (Dec 2008)

This is the lowest day on record for the price of oil since, well, a long time now… it went up to about $147 in June/July of 2008, and it’s dropped over $100.  No one could have imagined that back in the summer when all the papers could print were big scary images of “pain at the pump.”

So what do low oil prices mean?

One, Canada’s dollar’s going to fall lower (and presumably that of other oil-exporting countries too).  Two, we might start seeing more distribution cuts among the popular oil income trusts.  Three, gas prices remain cheap (duh!).  Four, there might be more cutting back on oil supply in hopes they can help prop up the prices.  Five, it’s just another sign that world economies are still contracting and are expected to continue to contract.

Once there are expectations that the economy might be on the way up again in the foreseeable future, we’ll start seeing rising increases in the oil prices again.

As such, oil price is a great barometer for industry perspectives on how the economy is doing.  If oil prices are high, it means (1) many countries are buying it for production purposes and (2) more oil sales are expected in the future in order to keep up global growth.  So these are some of the reasons I have the nerdy habit of looking at the oil price each day… you can see these updates here on my site in the sidebar at the bottom – that little chart updates on a live basis.

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