My $96 Weekly Oil Dividend
by Charlie Epstein (comments: 0) |
In January 2008 the price of a barrel of crude oil hit $100. It hit its record high of $142/ barrel in July 2008. From 2008- 2014 oil prices bounced between $80-$100 per barrel. During that time, the global economy continued to expand.
Here in this country, in spite of $3-$4 a gallon of gas at the pump, employment went down, more consumers chose to go out to eat, bought more cars, stood in line at Starbucks, Chipotle, and McDonalds and keep the economy expanding and pumping along.
It was not until January of 2014 that crude oil prices dropped by one-third to $60 a barrel, as US Shale Oil fracking production began to gain traction in the world markets. Fracking is another technology innovation that has made oil production faster, easier, cheaper and bigger.
In January 2016 crude oil fell to its lowest level in eleven years, to $32 a barrel. As I write, Feb 15, 2016 oil stands at $28 a barrel world wide.
With the economic sanctions lifted on Iran, a country that relies on 80% of its economy from oil production, it seems unlikely that the global supply of oil will shrink anytime soon.
Saudi Arabia, the largest producer of oil in the middle east, has already signaled its fear of Iran becoming the dominant power in the region. As such, Iran has made it known that it will not cut its oil production anytime soon. With a Sovereign Wealth Fund in excess of $700 billion US dollars, the Saudis can continue to produce oil at less than $30 a barrel and still maintain the spending it has committed for its own economy. Oil dependent economies like Russia and Venezuela would be hard pressed to stop pumping oil, given the fragility of their economies.
For now cheap oil- in real dollar terms- seems a long term play.
Economists in the US have projected this to mean a $60 billion dollar dividend to working Americans at the pump this year.
What does that mean to the average consumer?
My $96 weekly oil dividend
Yesterday I went to the gas station to fill my gas guzzling LR4 Range Rover. When gas was over $4 at the pump it cost me over $82 to fill my 19.5 gallon urban assault vehicle.
Today, at $1.73 (Western Mass gas rates) I paid $33.73. A $48 savings.
Multiply that by 2 (number times per week I average at the pump) = $96.
Times 52 weeks= $4,992 per year savings.
Your Personal Oil Dividend
Now I recommend you do the same calculation for yourself to determine your current weekly oil dividend.
What are you planning to do with yours?
You could save it...or
You could spend it...or
You could invest it.
Right now economists say, we the consumer are saving more of it than we are spending, or investing....and that is rattling the global stock market, among other economic issues, driving the markets down for the first time in 8 years.
Many economists believe the oil dividend of which I speak will eventually translate into a 0.50%-1.00% increase in US GDP, as consumers start feeling the "wealth effect" of their oil dividend, and rather than save it, or pay down their debts, they will do what the consumer is so good at....spend, spend, spend!
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Charlie believes the cornerstone of creating success with your finances and your life, is to act like an entrepreneur! Eliminating an "entitlement mentality" and taking control of your life's choices and personal finances are the first steps to igniting and aligning your passions with your finances.