Oil price fall starts to weigh on banks
It didn’t take long for the PR machines retained by the banks to try and depict the falling oil price as a bad thing for the wider economy. This article in today’s FT suggests that because, for example, Barclays, face losing $850 million on speculative loans to oil companies, the rest of the economy is toast. We think this is more special pleading from a banking sector which has simply become hooked on state bail outs.
The wider economy benefits massively from falls in the oil price because people spend less on filling their cars. This means there is more money in people’s pockets which can only be a good thing. There would be even more disposable cash circulating if the government didn’t tax fuel so heavily but while even a cartel as strong as OPEC cannot resist market forces, HM Treasury, it appears, certainly can. We can only hope that once people wake up to the benefits of cheaper imported energy, the penny might drop that we’d be even better off if we didn’t import any at all and investment in long term renewables might not be so batty after all.