It’s only about half over, but 2012 is already looking like a very bad year for the world economy. The measured optimism that many had going into the year has completely faded. The good signs at the end of last year turned out to be a short uptick rather than the beginning of a long-term trend. Once again, smart observers are beginning to debate whether a double-dip recession is on the horizon. The current state of Europe and China does not inspire confidence that it will be avoided.Yet amidst all this bad news is a silver lining, and it’s a big one. The Financial Times reports that a number of large energy companies and investors are preparing for serious downward pressure on oil and gas prices. The poor economic situation that is poised to rock the world economy may be even worse for oil producers:
Oil consumers fear the current slide in prices – largely due to slower economic growth in China, the main engine of oil demand, and the eurozone sovereign debt crisis – is only the beginning of a major sell-off. Saudi Arabia has this year boosted production to a 30-year high, further subduing prices.
As always, however, bad news for oil producers is good news for consumers—the recent spike in energy prices is likely to drop considerably. Although the prices are unlikely to fall all the way to their late 2008 lows, it still means cheaper gas, cheaper heat, and reduced manufacturing costs. For the millions of families struggling with unemployment and falling wages, these small changes could make a very big difference.Geopolitically, cheap oil is also a good thing. President Putin is going to have a harder time taking advantage of Europe’s woes. It will be easier to maintain support for the oil embargo against Iran. Hugo Chavez has less spare change to scatter around the region.Enjoy it while it lasts.