The consequences of cheap oil

The brilliant British economist Tim Harford ruminates on the current era of cheap oil, and what it means for the global economy and the environment. Traditionally, periods of cheap oil correlate with periods of economic expansion, generally in the agriculture, industry and the consumer sectors, but a peculiar divergence under way suggests that the relationship between oil prices and economic expansion is not causal. “One of the concerns about today’s low prices is that the positions may be reversing: the big winners, American consumers, are using the spare cash to pay off debts; meanwhile, losers such as Russia and Saudi Arabia are cutting back sharply on investment and public spending. If carried to extremes, that would mean a good old-fashioned Keynesian slowdown in a world economy trying to spend less and save more.”