No, oil today costs almost exactly what it did last year... however, it is currently PRICED lower than it was... and that is not good for oil companies. It is good for almost everyone else, however, other than the oil producers and those who are economically dependent on sustaining higher than free market prices for oil that is produced. (And, why is no one talking about whether or not the Saudi's might have derivativized away their price risks before proceeding to lower prices ? )
If we didn't have lower oil prices right now... the world's economy would already have ground precipitously to more meaningful halt than it has with the lower prices. Economic reality today is that the price of oil has a more potent influence on economic activity, now, than has the price of money. When the problems with the economy can't be resolved by "cheap" money... that is only cheap for some... even with negative interest rates not enticing borrowers to choose to take risks that will make them the future victims of the bankers next practice and performance of fraud... accelerated deflation in the prices of primary inputs provides something of a cushion that otherwise wouldn't be there...
People who are used to the concept of steady inflation being sustained by a persistently pursued inflationary monetary policy... with prices for almost everything (expected to and) increasing gradually over time in a more or less uniform way... seem wholly unable to recognize what deflation looks like. Inflation, with positive expectations and the fully intentional support of the financial wizards... tends to operate "smoothly".
Deflation, on the other hand, being the great fear of the monetarists... is thus denied where it exists, instead... with that denial resulting in a discontinuous experience in which prices are seen to swing radically in narrow channels... with the changes observed being dismissed as "market noise" rather than deflation... because of the concentration of the focus in its expression...
Oil, however, is a far more potent "lubricant" of the economy than money... lower oil prices do provide a direct addition of a surplus in money along with a very high value in liquidity that mean its impact is nearly instantaneous in effect, whereas changes in interest rates typically take 6 months or more to work through the economy, even when it is functioning normally... and, note, ours is not functioning "normally" (at least, not in the way most would expect it should)... with the real liquidity factor being negative (below 1) currently.
So, as you see the continued bluster about "we're going to raise rates, ready, ready, never..." ? The creation of money, currently, has essentially zero positive economic impact, the impact it has mostly being to sustain the imbalances that the prior creation of money has imposed. The currency generators have lost control. Rates are rising now in spite of them... not because of them... as the real economy is choking on a LACK of money, in spite of the "easy" nature of their willingness to produce new money... for some... that never makes it into the real economy.
It is critical to understand this... as the risks we face now are dependent on it. Rates rising (by themselves) by any meaningful measure... will kill what's left of the global economy. Deflation will proceed, in step wise fashion, as the impacts of the decline in the real economy are reflected in sectors in sequences. We've already seen many commodities whacked by larger margins than oil has been. But, no one seems to care or think it is important... when the price of iron, or coal, drops by larger percentages than oil has ?
When you do see oil prices rising, in this deflationary context... you should view that event as a proxy for an interest rate hike... only, again, with a far more immediate impact, and more direct ability to have a broad impact through real liquidity than is possible, now, through interest rate changes. Lower oil prices provide a deflationary cushion that insulates us from some of the worst impacts of failed monetary policy... but, as oil prices are declining, the economic impact that has also operates to enable and allow the continuation, but MASK that underlying and far more ugly economic reality... because the failure to correct larger policy errors, over time, continues to operate in making things worse... with lower oil prices cushioning that impact, too...
When oil prices do begin to rise... for whatever reason... "stick a fork in it". The impact will be like dramatically raising interest rates in the middle of a depression, right at the point where it will do the most damage. In the result, you'll see the entire global economy doing what Greece has been doing this year...
The commodities boom that has been underway since China began re-industrializing... is over. But, it's not just about China. We're at the peak of multiple bubbles all at the same time... and the guys running the policy and operating the bubble machine... don't appear to have a clue what they're doing... while fully intending to keep doing more of it.
I think that means the commodities you're looking at... aren't going to be in a net supply imbalance for a LONG time. The pipeline is overly filled with projects hoping to feed China's sustained 7% plus growth... which isn't going to happen... resulting in a large surplus in potential, which also ensures prices will be contained. The bigger issue, though... is that sustaining the policy errors we have... without applying corrections... means whistling past the graveyard in relation to market reality, which WILL correct the problems officialdom is neglecting and/or sustaining for purpose, whether officials are honest about what the problems are, or not.
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