Tags: oil | Nigeria | Ip | prices

Panel Takes Upbeat View of Low Oil Prices — Part I

By    |   Tuesday, 11 Nov 2014 07:42 AM

The plunge in the price of oil from $105 to $80 per barrel during the summer has triggered considerable discussion about the effect this will have on economic growth, future oil production and energy independence in the U.S. A group of experts met recently at the Wilson Center, a government-sponsored think tank in Washington, to discuss these questions.

Former Rep. Jane Harman, D-Calif., the Center's CEO, proclaimed that this is "the nation's key public policy forum," which might come as news to readers from outside of Washington, but the Center has sponsored some excellent events with bipartisan panels despite the Center's Democratic tilt.

Kent Hughes, a public policy scholar associated with the Global Europe program, noted a AAA report, which has generated national headlines, that the price of gasoline has fallen to $3 per gallon. Panelists included Jan Kalicki, formerly of Chevron; Raymond Gilpin, dean of the Africa Center for Strategic studies at the National Defense University; Risa Grais Targow, formerly of Treasury, now covering Venezuela for the Eurasia Group; Will Pomeranz, deputy director of the Kennan Institute at the Wilson Center, who practiced law in Moscow; and David Ottaway, a senior scholar at the Wilson Center and former correspondent with the Washington Post, who has written a book on Prince Bandar of Saudi Arabia; The moderator was Greg Ip, formerly of The Wall Street Journal and The Economist, who has written a forthcoming book while a visiting scholar at the Center.

In brief comments, Ip stressed the negative implications of the falling price of oil, now that the U.S. has a higher profile as an oil producer and the falling oil price contributes to deflationary pressures that led the Bank of Japan to institute a quantitative easing (QE) program, supposedly surprising world markets on this particular day. (No one should have been surprised, as QE remains the order of the day among global central banks.)

Kalicki began with a global overview. He saw an $80 price, if maintained, as an additional economic stimulus for the U.S. and a source of additional pressure on producers, although he emphasized that this is still within the realm of hypothesis. Most oil-producing countries have come to depend on $100 oil to finance their budgets and would surely be squeezed by prolonged $80 oil, and these countries tend to be governed by kleptocratic rulers. He proposed a price floor of $3.25 per gallon of gasoline, with the proceeds funding an energy security trust to finance infrastructure. He concluded that while low prices might not be here to stay, the U.S. should take advantage of the opportunity to gain diplomatic leverage.

Gilpin covered Africa, which has 54 oil-producing countries, and he chose to concentrate on the largest, Nigeria, the 10th largest producer in the world; however, it is so populous that it doesn't make the top 20 producers per capita. Nigeria has deferred modernization of its oil infrastructure, and the low price of oil will reinforce that deferment, he noted, adding that the low oil price is depleting its sovereign wealth funds and putting pressure on the currency.

(Archived video can be found here.)

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Robert-Feinberg
The plunge in the price of oil from $105 to $80 per barrel during the summer has triggered considerable discussion about the effect this will have on economic growth, future oil production and energy independence in the U.S.
oil, Nigeria, Ip, prices
520
2014-42-11
Tuesday, 11 Nov 2014 07:42 AM
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