Global oil prices are plunging.
The current price of oil stands at $45 a barrel on Sunday, November 16, 2015. Factors are not just the additional oil being introduced by the Middle East, but also by the United States whose domestic production has nearly doubled over the last six years.
In addition, increased energy-efficient vehicles and the demand for electric cars is reducing demand.
Individual motorists are enjoying the reduced prices at the pump. Energy prices are also down which means cost of living is reduced by the falling prices.
However, the downside is that so-called oil rich countries will lose their main revenue stream and this will affect global economic stability. In fact, any economy which relies on the sale of crude oil will be at risk, including the oil states of the U.S.
OPEC is still refusing to interfere with the increased availability.
— Forbes (@Forbes) November 15, 2015
— Bloomberg TV (@BloombergTV) November 15, 2015
In fact, Saudi Arabia is considering a major re-shift in its economy away from oil.
Saudi Arabia officials have admitted to the Telegraph that relying 80-85 percent of government income left the country vulnerable to oil price fluctuations.
“The economic council believes that this is a window of opportunity to create new prospects for economic diversification.”
There has been what economists call the “curse” of oil rich states which paradoxically dooms one-trick-pony economies into paying people to work in fake jobs as revenue from oil profits keep a country from investing in markets that would diversify the economy.
These profits are half when oil prices are half and this means that the economy is already seeing more people in jobs, including a new female work force.
Saudi Arabia is also imposing taxes for the first time, for example, a property tax was proposed at the Shura Council.
Subsidies on fuel would also end and an increase in business enterprise would help transition to a modern sustainable economy. However, with oil prices likely to increase in line with previous short-term drops in prices, it is unlikely that the pressure to evolve the oil rich economy will continue enough to make rapid change possible.
One economy that is hurting is Russia. For every dollar drop in oil prices, Russia loses $2 billion. This means that the $70 billion drop in prices above represents $140 billion lost to the oil dependent country.
One unexpected benefit is that the falling oil prices are hitting Islamic State, which depends on oil sales to fund its ground operations between Iraq and Syria.
With increasing air strikes by Russia, the United States, and now France after the Paris Attacks in which 129 people were brutally murdered by Islamic terrorists, and the decreasing price of oil means IS will only have a third of its oil revenue of 2013 during its biggest rise. The tipping point could be in favor of terrorism going bankrupt due to falling oil prices.
[Photo by Justin Sullivan / Getty Images]