Crude Oil Sell-off Only Temporary

Liberal celebrations of falling oil and gas prices will be short lived, as history has shown that for the past five years every violent sell-off in oil is met with an equally intense surge. In the last two instances crude oil fell into the 80′s, the price rebounded vigorously:

Why are oil and gasoline prices falling so much? Fears of economic in Europe and global deflation are the usual culprits. Plunging stocks and a rising dollar are also to blame. Here’s what’s going to happen: when stocks finally rebound, so will oil and gasoline.

Contrary to leftist belief, any added ‘purchasing power’ from falling oil is offset by economic weakness elsewhere; there is no ‘net positive’ associated with falling oil prices. Second, all consumer spending is the same whether it’s oil, healthcare education, or plane tickets. The left thinks that somehow money that is spent on gas doesn’t count as consumer spending – it just goes directly into the coffers of the greedy oil companies, I suppose. There is no such thing as a ‘superior’ form of consumer spending. In the end it all goes into GDP.

This recent 5% selloff in equities isn’t the beginning of a 2008-type crash. In 2007, the housing market was unraveling and you had signs of global recession. Numerous important financial institutions both in the US and abroad were close to insolvency. Europe is in a funk, its been that way since 2007, so this is noting new. Meanwhile, in the USA, you still have blowout profits & earnings for six consecutive years, record consumer spending, no hints of problems in the financial and housing sectors, steady GDP growth, good demographic trends, rapid technological progress and free market capitalism. The majority of the most innovative and fastest growing tech companies originate in Silicon Valley, home to Facebook, Snapchat, Apple and Google. You won’t find recession there. Bay Area real estate keeps making new highs in all-cash bidding wars between the Nouveau riche tech employees, rich foreigners, and private equity.

Software, web 2.0 and productivity is making the world flat by creating new industries, changing existing ones and destroying obsolete ones. Wealth creation is pervasive, yet for many unobtainable. The unparticipatory wealth creation boom leaves many losers in its wake.