In one year the barrel of oil has gone from about 100 US dollar to 50 US dollars. With 50 US dollar the World thought that we have reached bottom. The world has had great problems due to this enormous change in costs and income, and the market was screaming for a higher oil price. After the devaluation or adjustment of the Yuan we find a falling interest in commodity. With the weakness of the Chinese money we find it more expensive for China to import. This is something that will directly afflict the demand for oil. It is predicted that the already cheap oil will become further cheaper, and that a barrel might go as low as 30 US dollar. Most likely this change will be the trend for 2016 and perhaps also 2017. The origin to this problem is China with its bubble and adjustments/ devaluation.
Many countries will suffer due to this China caused change in price. We might see an increased unemployment rates and perhaps more Greece like situations might occur.
An interesting point to make are where does all this oil go.
The real problem are for the producers that have an economy that depends on a high oil price. For us consumers we might naively belive that our gasoline and airtickets become cheaper. I guess not!
A 10% change in the oil price gives around a 0.2% change in global GDP; meaning that a fall normally increases GDP by moving the resources from producers to consumers. Consumers consume more than producers thereby we might expect cheaper goods and more circulation in the money. Then we also have to remember that the three biggest oil producing countries are United States, Saudi Arabia and Russia. Two of this has huge problems with their economy, and the result of this predicted reduced oil price WILL afflict. Most likely the world economy will slow down.
Just to have mentioned it China is the second largest importer of oil. Dropping oil price is pure income for China, and an expense for the producers. Most of the Chinese production goes to export, and with the change in Yuan we find the income from sale goes down, but the low prices will attract more buyers. In the end China will earn more. USA the largest consumer of oil in the World will experience this differently. First we will find an increase growth in 2015, but mixed with insecurity due to a slow global growth and vounerable stock market. Depending on the state we will find different results. In Europe we find the inflation becomes reduced and that the dependence to Russia becomes closer. In poor countries we might find the reduction in oil costs as a blessing. Most likely India will cut their subsidies on oil products later this year. Many countries like Venezuela, Libya, Saudi Arabia, Iran and Iraq will do exactly like India and take away their subsidies. Perhaps the turbulent Venezuela will prosper as a democratic country due to the low oil price; meaning a shift in government – something that for sure will give collaterals in the Caribe.