PER 2015
March. The Core Consumer Price Index, which excludes volatile components such as food and energy, gained 0.3 percent in April, the biggest monthly gain since January 2013, which can allay the fear of a possible deflation. The American economy is generally on the right track and the economy has very positive prospect contrary to the weak recovery of European economies. On the issue of oil, however, its impact on US is more complex than the short term economic growth. The US crude oil production has increased dramatically in the last three years due to fracking, which was a crucial reason for the price fall. Now as OPEC and Russia refuse to cut their supply to boost price, the oil industry in America is struggling to keep the profit margin as they have just entered the competition with their new shale gas and oil, especially for some small companies as they are still quite naïve about the strategy to compete in global market. America is forecasted to eventually become an oil net exporter, which can happen in as close as ten years’ time. If that happens the influence of current oil super powers on America’s foreign policies would decline dramatically. This would of course be a disaster for traditional oil producers, and they would probably try everything to keep the oil price low, and if it happens the US oil industry is expected to be facing huge challenges. For developing countries who are also massive oil importers, namely China and India, the falling oil price is generally beneficial, as the demand side has always been strong and it releases inflationary pressure. The situation is slightly different for two countries though. The Modi demonstration has started a reform scheme of economic liberalization, which would effectively end the socialist sovereign republic, which is outlined in the Indian constitution. In short- term, however, these reforms can hit the lowest-income earners, for example the government recently
planned to remove the subsidies given to the most impoverished to buy basic food at a very cheap price from government stocks. A low oil price can
bring down cost of living, therefore reduce the pain of the glorious neoliberal revolution. For China, however, as some economists argue its economy has reached the Lewis Turning Point, it can easily fall into the middle income trap in a very close future if the cheap-labour driven economy cannot be transformed. As said above falling oil price can undermine capital-intensive industries, so the situation is not as optimistic as in India. Politically the communist government would not like to see the downfall of Putin regime, as the last year’s natural gas contract which worth $400 billion in total demonstrated, together with the $270 billion oil contract two years ago, at a maybe regretful price of $105 per barrel. Now it’s time to have a look at net oil exporters. Putin is facing the biggest challenge in his political career. Is he going to deliver the promise he made before 2000 presidential election, when he said
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