Lawrence Kudlow‘s latest column posted at Human Events challenges recent negative news reports about falling oil prices.
Seldom has so much good news been portrayed so negatively. Oil prices continue to fall in the U.S. and around the world, but nearly everyone in the media is grumpy about it. The headlines today are among the silliest I’ve seen: Energy-company stocks are declining, oil deflation is an economic threat, the Fed might raise rates much later than expected, OPEC is dissolving, shale companies are going bankrupt, Russia is going bankrupt(!), and on and on.
Well, most of this is just humbug. Lower oil prices are unambiguously positive.
First, U.S. oil production has nearly doubled in recent years to 9 million barrels a day, and the Paris-based International Energy Agency expects U.S. supply to rise by more than 1 million barrels a day next year. And it is this supply increase that is driving down prices. Saudi Arabia and OPEC have essentially thrown in the towel, surrendering to the inevitability of lower prices from exploding U.S. energy production.
This is not only a triumph of U.S. energy independence; it is a victory for the workings of the free market. Greater supply, not government cartels, is driving down prices.
And the latest oil-price drop of nearly $8 a barrel makes the economic outlook even rosier. Apart from the declining share prices of some oil producers, virtually every other aspect of the world economy benefits, including most world stock markets. (By the way, the IEA reports that most production in the Bakken formation, one of the main drivers of shale-oil output, remains profitable at or below $42 a barrel.) And here in the U.S., the oil-price drop is a huge tax cut that will primarily help the middle class.
