The good, bad and ugly of declining oil prices across the globe

Russia's President Vladimir Putin at a meeting in the past. Turkish President Recep Tayyip Erdogan Monday held talks in Ankara with his Russian counterpart aimed at boosting trade and strengthening relations, despite sharp differences over the crises in Syria and Ukraine. FILE PHOTO |

What you need to know:

  • The Middle East terrorist group, ISIS, is relying on oil sales to fund its caliphate. A decrease might mean less jihadist activity in Europe, America and Australia. It might also tap down violence throughout North Africa.

Filling my car’s gasoline tank this week, I was amazed that the cost was one-third cheaper than August.

The reason, I discovered, is a worldwide oil glut that has supply outstripping demand. Fuel-efficient vehicles and new oil producing techniques have changed the world of energy. Texas out produces Iran.

All of this is good news for America. The decline in oil prices will be like a tax decrease for the average person, and the good news will surge through the economy in the next few months. Think more spending for iPhones, cars and major appliances. Think more jobs.

But our good news may add to our isolation. As we feel good, there are a number of economies that will likely suffer. Venezuela and Mexico, which did not save for a rainy day, come first to mind because they are neighbours and large oil exporters.

Might we see more refugees at our southern border? Might the political situation in Venezuela become ungovernable?

Russia has been described as a giant oil company that’s run by a dictator. Indeed, Russia has enjoyed 7% growth in recent years. Vladimir Putin has hero status at home despite the shoot down of passenger-packed Malaysian jet over the skies of Ukraine.

Cheap oil means that Russia’s economy will lose heat, and Putin’s threat to restrict sales to Western Europe will hold little weight. With a melting arctic cap, the ability to move cheap petrol to needy nations is much easier.

Might this weaken Putin at home? Might it make him easier for the world to deal with?

The Middle East terrorist group, ISIS, is relying on oil sales to fund its caliphate. A decrease might mean less jihadist activity in Europe, America and Australia. It might also tap down violence throughout North Africa.

For China and India, cheaper energy could fuel explosions in construction. But it will also ignite new concerns about the pollution that have made the airports in New Delhi and Beijing off-limits on smoggy days.

But will the American voter get it? The upcoming fall elections, which may turn the Senate into a Republican majority, will hardly produce much rhetoric about the bargain at the pump.

Republicans will not want to give credit to the president and Democrats will not want to associate themselves with Obama. Everyone is running with one eye on the present and another on the 2016 presidential race.

This week, I had the chance to listen to Albie Sachs, a key author of the South African constitution. Sachs, who came close to assassination by pro-apartheid forces, rose to his nation’s highest court. He remains a leading legal intellectual at 79.

Sachs asked the crowd of Americans whether they knew what was the most cited constitution in the world. Nobody – in a crowd of several hundred – could answer the question.

The answer is Canada, said Sachs. Then, he added, that the fact no one could answer the question is a sign of America’s current isolation. You think, he said, of yourselves as the ones who stand out – then, there is the rest of the world.

Like so many events, cheap oil will touch everyone’s shores. Those who appreciate the consequences and context will understand the bigger story.