The Reality of Our Recovery

Must be brilliant economic direction as each political party claims why its policies have boosted the American economy to the growth levels we see today. But American workers are working longer hours with less buying power as the mega-rich take advantage of loopholes and out-and-out slants to our legal and tax system that only benefit “them.” Even the surge in the stock market is mostly a gift to those at the top of the economic ladder. But, Peter, we are seeing retail sales flying and people seeming more optimistic even at a grassroots level. Why?

To the biggest consumers of fossil fuels, notably the United States and China, the answer falls into one massive category, one that really cannot be unilaterally be implemented by any one nation or even a confederation of nations, no matter what anyone might say: the plunge in the price of oil. Consumers are walking around with significantly enhanced jingling in their pockets, more to spend, more to stimulate the economy. OK, not everyone is benefiting from this largesse: “The nearly 50 percent decline in oil prices since June has had the most conspicuous impact on the Russian economy and President Vladimir V. Putin. The former finance minister Aleksei L. Kudrin, a longtime friend of Mr. Putin’s, warned this week of a ‘full-blown economic crisis’ and called for better relations with Europe and the United States.

“But the ripple effects are spreading much more broadly than that. The price plunge may also influence Iran’s deliberations over whether to agree to a deal on its nuclear program with the West; force the oil-rich nations of the Middle East to reassess their role in managing global supply; and give a boost to the economies of the biggest oil-consuming nations, notably the United States and China… It might even have been a late factor in Cuba’s decision to seal a rapprochement with Washington.

“After a precipitous drop, to less than $60 a barrel from around $115 a barrel in June, oil prices settled at a low level this week. Their fall, even if partly reversed, was so sharp and so quick as to unsettle plans and assumptions in many governments. That includes Mr. Putin’s apparent hope that Russia could weather Western sanctions over its intervention in Ukraine without serious economic harm, and Venezuela’s aspirations for continuing the free-spending policies of former President Hugo Chávez…

“Hard-hit anti-American oil producers have blamed foreign machinations for their woes, suggesting that Washington, in cahoots with Saudi Arabia, has deliberately driven down prices… This view is particularly strong in Russia, where former K.G.B. agents close to Mr. Putin have long believed that Washington engineered the collapse of the Soviet Union by getting Saudi Arabia to increase oil output, driving down prices and thus starving Moscow of revenue.

“In many ways, the recent price fall really is the United States’ work, flowing to a large extent from a surge in American oil production through the development of alternative sources like shale.” New York Times, December 24^th. It’s the economy stupid!

Indeed the rise of religious fundamentalism – particularly those belief-systems that embrace severe austerity that provides a pious explanation for poverty that too many individuals are unable to escape – appears to be directly and mathematically related to the fall of economic opportunity and the collapse in too much of the world of quality of life and hope for a better future. As global climate change accelerates economic deprivation – droughts rendering farmland desiccated and fallow – you can almost use a climate map to pick the places with the angriest and most desperate people, folks likely to adopt militant policies and angry religious leaders.

Are we experiencing a Malthusian destiny, enhanced with that man-made expanding spiral of negative climate consequences? Is our future defined by conflicts over resources – energy sources, food and water – disguised as religious wars and clashes of civilization? Would we be seeing the angry, senseless violence in the name of religious purity if everyone were well-fed with a stable economic future? The direct and immediate impact – politically and economically all over the world – of collapsing oil prices is a very interesting lesson for us all.

Oh, don’t worry, oil prices will rise again, and the politics of oil will resume its nasty course. But for this moment in the time-space continuum, we have a moment to understand exactly how the puzzle works, and how, precisely, humanity reacts to dynamic changes in major economic variables. Look at the winners and losers in the recent drop in oil prices. Look at the consequences, and the political fallout. The leg bone is connected to the hip bone… You get the drill, but perhaps we can figure what to do in our national and international policies a bit better by absorbing exactly what just happened.

I’m Peter Dekom, and oil has an amazing variety of lubricating effects that we really need to take seriously.