Is Vacation Over?

We haven’t seen the ramifications of the drop in global oil prices yet.

Comments: 176

  1. Boehner and McConnell were totally ready to tee up the climate destroying XL Pipeline for their Saudi buddies, their signature job-creating program. So sad.

  2. Sorry, Look. It's not the Saudis who have an interest in having the XL Pipeline go through, but our very own All-American petrocrats who are co-owners of the Republican party who stand to benefit, at the expense of the other 300 million + Americans.

    And a reminder that the five Republican justices on the Supreme Court have ruled that it is indeed constitutional for anyone to bribe politicians with as many millions of dollars as they want as long as they don't actually tell the bribee what the bribe is for. Of course, most of us don't have a few extra million dollars lying around for bribes, and also of course probably most politicians worth bribing don't need to be told what the bribes are for -- if they can't already surmise, they can simply skim a newspaper or watch Fox.

  3. No one in OPEC wants the U.S. And Canada to produce and export more or any oil. There is no handy oil shortage to force people to do as you wish. There is just we supply the oil and keep the money and jobs here or they supply the oil and we send them the money. The difference should be obvious, if they get the money they spend it on ISIS!

  4. And what fresh myopic insanity will be fueling these two
    foul winds in 2015? We ain't seen nothin' yet.

  5. Might falling Oil trigger recall
    The life before Soviet fall,
    A country unified,
    No inflation ride,
    Nor Oligarchs having a ball?

  6. Larry,

    You must have never been there.
    The Oligarchs always ran the "Bear"!
    A "Worker's Paradise"really! Where?
    "Hard Currency" always talked.

    They never walked the walk.
    All they ever did was talk!
    Will Rogers never met Uncle Joe
    It was worse than you could ever know.

  7. Love the poems!

  8. Which is to say that this is the optimal time for the U.S. to become energy-independent. And it's also the optimal time to become independent of fossil fuels, thereby getting the Kochs off our backs right along with the Saudis. The new political realities may indeed emerge as a breath of fresh air.

  9. Stu, could you expand on the sentence that begins "And it's also the optimal time...".

    Carolyn Egeli and I both simply argued at Joe Nocera's latest Shale fracking is our (American) Santa Claus that Nocera needs just once to acknowledge the alternate realities we favor. Lot's of Times readers liked those comments, but no Times columnist, not even Dot Earth deals with those realities, let alone Nocera.

    I would have preferred a Friedman column just looking at the US. I think I will let this reply end here and see if it appears soon enough for you to reply.

  10. @Larry Lundgren: We need to invest in start-up companies seeking to replace oil, coal etc. with green energy (wind, water, solar). Don't know about you but I would prefer not to have to follow the Chinese example of walking the streets with the lower half of my face concealed at all times.

  11. I appreciate the analysis. Looks like oil producing nations and their client states are in for a bumpy ride. At the same time, oil price reductions should spur economic growth as input costs decline.

  12. "Russia has a dangerous gap between the funds flowing into its economy and what it needs to send out to pay its debts and finance its imports. Putin can’t relieve the pressure without a lifting of Western sanctions. That would require him to reverse his seizure of Crimea and intervention in Ukraine."

    Or it can just not pay the debts.

    That doesn't mean default. It means sanctions. We put sanctions on them, they put sanctions on us. They seize the debts, just as we seize their assets.

    That means they can't buy things from us? Well, they can't anyway, sanctions, remember?

    They'll buy from someone else. There's always someone who will sell for cash, and they've got half a trillion dollars in cash reserves, plus whatever they get for oil, gas, titanium, aluminum, and a lot else.

    A new Cold War fought via economic sanctions won't go all one way. The quote above assumes that amid all our sacntions on them, they'll hurt themselves in their urgency to go on paying us. What?

    There will be unintended consequences, sure, but not only to the Russians.

    Meanwhile, the Saudis are doing this deliberately. They won't be hurt any more than they choose to be hurt for their purposes, with trillions of dollars in reserves and a future income stream for oil to buffer it. The unintended consequence will be to fracking, oil shale, and alternative energies that all cost far more per unit of energy than the new lower price of oil.

    Putin give back Crimea? Dream on.

  13. Mark,

    You are spot on. There is going to be pain here in the oil shale fields. The Saudi b/e level in oil is $6/barrel. You are also correct, the Saudi's are out to crush our energy independence drive. Everything else that happens is "collateral damage" as far as they are concerned. They are keeping their eyes on the prize. Why we let them finance the hundreds of mosques in the USA I have no clue. Guess nobody is thinking of a Fifth Column. We may regret that, too.

    And Putin, if he gets cornered, could turn our to be very, very dangerous to the modicum of peace in Europe. We had better be careful what we wish for, we might get it. We aren't going to see Crimea out of the Russia's control and Ukraine is still up for grabs. Our strategy is nonexistent.

  14. Reality checks:

    "[Russia] can just not pay the debts. That doesn't mean default."

    No, failure to make debt payments within contractual limits is default, however the debtor may "spin" this failure.

    "They [Russia] seize the debts, just as we seize their assets."

    1. Debts per se cannot be "seized". The payment stream of a _creditor_ can be seized, but not a debt. A debt can be paid, defaulted, or forgiven, but not seized.

    2. "We" have seized precisely which assets? US economic sanctions generally restrict trade or, in some cases, freeze assets without seizing them -- by US law, conditions for seizure of property are restrictive. As far as I know, Italy (alone among Western states) seized about USD 40 million of real estate from one Russian tycoon. Is Mr. Thomason aware of other asset seizures?

    Mr. Thomason correctly suggests that Russia (like any debtor) can choose to default. However, his suggestion that default would be manageable for Russia seems exceedingly far-fetched. Russian debt was already downgraded, and is likely to reach "junk" status within a few months.

    Russia's economy has been strongly dependent on foreign investment. There is not enough capital in Russia to meet the needs of (hoped-for) future economic growth. Default would badly impair Russia's access to such capital, with heavy economic consequences.

    Russia's development requires it to fulfill its contracts, with respect to both debts and the inviolability of international borders.

  15. Gosh, what nonsense so early in the morning. To take just one item: "Cuba's decision to bury the hatchet with America had to have been spurred in part by Havana's fears of losing ... subsidized oil." First, the talks began 18 months ago and were continuous since then, whereas oil has gone done only after the past 6 months. And secondly, Cuba has never been an obstacle to burying the hatchet. It's always been America holding up normalization, since American Presidents were previously afraid of offending Cuban-Americans and losing Floridan votes.

  16. In response to "abo" and the last point in your comment: Cuba has made repeated decisions over the decades to take a course that would continue the break with the US. Fidel was in love with the romantic ideal of revolution and continued to push it around the world, most specifically in Africa. The last Democrat in the White House before Bill Clinton, Jimmy Carter, made steps to improve relations, but Fidel slammed the door in his face by sending troops to fight in Angola and elsewhere. One point of Castro was showing that he could standup to the giant nation that hovers over his and to do that he needed to find new ways to be provocative. Carter wanted to go further, but his options politically were closed off in this country by Cuba's actions.

    Cuba might very well have collapsed along with the Soviet Union had its population not been highly conditioned to accept hardship and blame everything on the USA. Then, Venezuela came to the rescue.

  17. "abo", it is impossible to know with any precision what caused Cuba to act at this time. There have been many situations in history where hesitant governments act suddenly after long negotiations because of changing events. To some degree, there has been a desire in Cuba for a reopening for decades. When I made a trip to Cuba way back in 1978 Castro told a group of city officials from around the US that he would welcome investment in tourism on the island.(Carter had opened the American "Interests Section" in Cuba earlier and it looked, for a few months, like a thaw in relations was possible.) Cuba, in my view, has been an "obstacle" because when the choice came round, Castro always chose exporting revolution, but I believe you are correct in saying that the main problem has been on our end.

  18. Oil prices are not coming back any time soon.

    The combination of dramatically higher supply (US production doubled in 5 years to levels not seen since the early 1970s) and markedly lower demand for gasoline (higher fuel efficiency standards, demographic changes and slowing global growth) and a much stronger dollar make that abundantly clear.

    The last 10 years of oil prices above $50 dollars was the aberration.

    Thomas, you outlined some of the possible outcomes. But to simplify things, on balance when oil prices implode oil importers benefit and oil exporters suffer.

    The US, the EU, Japan, and China are the largest beneficiaries while Russia, Venezuela and the Middle East are the biggest losers.

    How important is the cost of energy to the economy?

    Well, consider the inverse relationship of Western economies to the real price of oil. The 60s, 80s and 90s saw booming economies, while the 70s and the aughts were abysmal.

    Meanwhile, the Soviet Union collapsed in the 80s and Russia defaulted in the 90s.

    Reductive analysis, yes. True, yes to that, too.

  19. But there's a difference this time, isn't there? The 1986-1999 drop in oil prices was brought on largely by non-OPEC production and by less global consumption, both transitory influences. Today, it's brought on by more sustainable factors, mostly widespread presence of shale formations whose oil and gas are accessible to hydraulic fracturing. Where before countries heavily dependent on oil revenues could rationally hope for a rise in prices, particularly if they reduced production but mostly because of global economic growth ... they can't figure on that anymore.

    That earlier hope kept countries from going over the edge. What will keep much of the Middle East and Russia, not to mention Venezuela and other South American countries hoping to transform themselves on the back of newly discovered reserves that they control, relatively stable?

    As to Russia, Putin probably could keep Crimea if he demonstrably backed off the rest of eastern Ukraine. But that won't really help him unless he can cut debt refinancing deals with the west as WELL as get rid of sanctions. And he'll STILL have major problems.

    As to the rest of it, what could be factors causing a significant and lasting rise in oil prices? Ever again? Massive global growth beyond the ability of cheap fracked energy to satisfy, when some companies are keeping oil and gas in the ground because they lack markets for it at reasonable returns?

    Look for an interesting fifteen years. Interesting in the Chinese sense.

  20. This entire column is built on the premise that we will experience a "steep sustained drop in oil prices." However, the current economics mitigate against such a drop. As Joe Nocera ( ably explained, the economics of the free market should be expected to stabilize the price of oil. Shale oil exploration has significantly increased the supply of oil, driving down prices, but as prices fall, shale oil becomes less economically viable. In other words shale oil is a safety valve for the oil market. If oil prices start to rise, shale oil production increases moderating the rise in price, but if prices start to fall too far, shale oil supplies start to dry up, thus moderating the fall in price. Capitalism works.

  21. And the premise is introduced by Friedman multiple times with "if." It is an exploration of what might unfold, not an assertion of what will.

  22. Economics works. Capitalism works when it actually allows economics to work.

  23. I thought I read tech advancements mean shale oil remains profitable as low as 35 -40 dollars a barrel

  24. After a couple of dozen trips to Russia in the past twenty years, I've come to appreciate the extremely high level of belief by the average Russian in the value of a strongly centralized state. They look upon Putin's 'iron fist' as a protection needed in a post-Soviet world. That faith in power will endure a great deal of deprivation.

    Here's an example. Suppose President Obama's foreign and domestic policies resulted in a 50% drop in two weeks of a typical person's salary. Rioting would ensue; Washington would become a volcano of emotions. What happened in Russia the past two weeks? People pulled money out of hiding and bought refrigerators, computers, cars, and other hard goods before the prices could be changed. Russia is far different than the US in terms of weathering economic disaster.

  25. Well that's because their whole economy is based on selling a commodity product to the world and arms to developing countries. So you can't use that logic in the US because the economy is diversified. What'you're saying did happen in the US, in the great depression, but it took 5 years and still wasn't dependent on one product.

  26. "This [the period 2008-13] allowed the major economic powers — the United States, the European Union, China, India, Russia, Brazil and Japan — to focus almost exclusively on economic rehabilitation." --- Friedman

    If the U.S. and the European Union were trying to rehabilitate their economies, they didn't do a very good job of it. The EU, until very recently, kept pushing for budget-cutting austerity, supposedly to get their economies moving again, but in actuality they just dug themselves deeper into recession. In the U.S., the worst abuses of austerity were fended off by Democrats, and there was a rather modest stimulus program in 2009-10, but the economy has been sluggish until very recently. Also, we kept up our involvement in the Middle East, most recently in fighting ISIS, and military expenditures remain a drag on the overall economy (although some are profiting handsomely).

    The economic tonic for both the U.S. and E.U. was Keynesian pump priming, with government(s) stepping in to make up for the loss of private investment by spending on public works and creating jobs in the process. But todays bankers and Wall Street types wanted none of that as it would have threatened their control of the global economy. In the U.S. they were fought to a stalemate, but in the E.U. they won the day.

  27. Correction, Mr and Ms Bergman.
    The economy of the US is still very sluggish for the 99 % of Americans who work and depend on wages/salary. The stock market highs don't reflect investment into companies but rather short term speculation on stock price alone irrespective of what the company does and where it does it.

  28. A wise Saudi Sheik once told his brethren 'the stone age did not end because they ran out of stones".

    Political leverage is not ending because the Oilcrats ran out of oil - they ran into competition!

    There WILL be Hell to pay!

  29. Yes, renewables have arrived, thank goodness!

  30. These events are working to America's advantage. Our enemies are roiled by falling oil revenues, while we are equipped to ride the downturn out. The icing on the cake would be to complete the Keystone XL pipeline, solidifying North America's march to energy independence. The leverage we gain by that is invaluable, from a geopolitical standpoint.

  31. Ray, your comment falls into one of the standard categories where your category is: Living in a Pastime Paradise or Joe Nocera Paradise.

    You cannot imagine a world other than a fossil-fuel world and a fossil-fueled energy independence. That fossil-fuel world is a pastime paradise.

    Have you heard about climate change and global warming or about the documented environmental damage done by the mining of tar sands?

  32. Keystone XL pipeline to your coast to export Canadian oil to the China et al… not sure I see the gain for energy independence, seems more like $$ for the Koch Brothers.

  33. Cheap oil makes tar sand oil uneconomic. Another good thing as it is bad for the environment anyway.

  34. Great article. But china will come thru for russia .

  35. The reduction in petro-dollar income will weaken
    every oil producer but the U. S. that looks
    not to export oil but to reduce imports.
    Energy conservation will be seen as not only good
    for the environment but will have the unintended,
    but welcome consequence, of boosting America
    as a world power.

    Rey Olsen

  36. WSGNY, please elaborate. Oil and gas producers WANT to export. We have no control over that. The US government can't dictate to these entities what they do with their product unless the oil and gas were nationalized. Am I missing something here?

  37. The marketplace dictates the price that oil exporters

    As prices and revenues go down, these nations
    are weakened economically.

    By contrast, the U. S. benefits from lower oil

    The more that environmental concerns lessen
    American dependence on oil, prices will fall
    with the lessening demand.

    This will exacerbate the problem for the
    exporters and provide further benefits for
    the U. S.

    Rey Olsen

  38. Economic diversity makes it harder for one entity or individual to control a nation. With lots of different ways to make money, lots of different people pull the strings. It's democratic class rule.

    But in single industry economies, which are quite often petrol economies, one party, one group or one person runs the show. We have seen this happen all over the Middle-East and in many authoritarian nations. Control over a single industry gives the ruler(s) the money to buy the influence and muscle they need to maintain power.

    These same regions have tremendously high youth unemployment. The young don't have careers, no future. This sense of hopelessness helped to give rise to the Arab spring.

    If the petrol dollars collapse, then the influence money goes away. Subsidized lifestyles go away. Hardship increases.

    If the low prices remain in effect for a couple of years, we will see changes on the world stage. They won't be pretty.

  39. I agree there will kind of kind of blowback, although the conventional wisdon (Wall St) would seem to think low oil prices are a good thing overall for the US. I also worry about sanctions on Russia in the current climate. After WW I the west stressed Germany to breaking with tariffs and reparations. After WW II we had the Marshalll plan. Which worked out better? I'm not saying we should let Putin get away with land grabs. Just that we need some carrots to go with our sticks.

  40. Friedman today came around to highlight all positives of cheap oil prices. But he didn't-as I expected-mention what is the main reason behind such drop?
    It's Obama-finally- taking a firm/ strong stand with Netanyahu & CO in Tel Aviv Vis-à-vis Iran. Obama’s decision to cool off relations with Iran and start positive structured dialogues -away from bombing threats or cyber sabotage- is the main reason behind falling oil prices. Gone are the 30-40% gallon markup risk factors for breaking out hostilities in the middle east. I would venture to say its Israel belligerent policies in the middle east that was costing us @ pump.
    At least Friedman didn't call Putin a thug today!!!!

  41. Yep, that Bakken and Eagle Ford had nothing to due with it! LOL

  42. Vacation over? Didn't know we were having one; we fell asleep at the wheel but never made it to vacationland. Oil-rich countries, on vacation perhaps for not considering the need for alternative sources of income, and educating their people to diversify their economy, have been relying on the high price of oil as if there was no tomorrow. Well, time for truth has arrived, reality has been set, and payment of their profligacy in consumption of foreign goods is coming to an end. This is called the 'curse' of oil. Belt tightening may change things for the better, but don't count on it; when an animal is corralled and suspects its imminent demise, it will fight back, sometimes with violence and in unpredictable ways.

  43. As America becomes an energy exporter, what sins may we expect? A purchased election? Arrogance abroad? Another Republican riding on a strong Democrat economy? Plus ça change...

  44. An America, slowly but inexorably, going bankrupt on $225 trillion in funded and unfunded liabilities. To be preceded by Illinois, California, Rhode Island, and maybe New York, choking on unfunded, state employee pension and health obligations. Thank you for the welfare state, uncontrolled social welfare spending, and the vast, enlarging underclass, Democrats!

  45. Out West, I just don't get it. Unless that is all you see in your neck of the woods. In my world, I see public social benefits have gone down systematically since Reagan and Clinton. Even Obamacare is a corporate largess plan for insurance industry and the pharms conceived by a conservative think tank. Are they all Democrats? Perhaps your community has no jobs. Who is running things where you live? Are Democrats responsible for globalism? Because that is what has made millions of jobs leave the country. Technology belongs to Democrats? Because that is also why there are fewer jobs. Did Democrats cause the drop in oil prices? I haven't noticed that Exxon Mobile, the Saudi's or big banks CEO's are particularly in love with the Democrats. They purchase their politicians from both parties. You are missing the point. The elite are neither Dems or Repubs. They are out for themselves, period.

  46. This note is only about a curious sentence in Friedman that seems to me to misrepresent Iran.

    Friedman writes: “… what happens to the developing Arab states and Iran, who have used oil money to mask their deficits in knowledge, education and women’s empowerment?”

    If Friedman is going to compare a “developing Arab state” with Iran as concern the three deficits he names, then he is going to have to name one such Arab state. I believe that there are now more Iranian women than men attending institutions of higher education in Iran. Name one “developing Arab state” that can match that. So how did Iran use oil revenues to mask educational deficiences? What deficiencies?

    In my experience – many years – meeting new arrivals at the Red Cross in Linköping, Sweden, the Iranians stand out as being the most highly educated and able to move most quickly into responsible positions in Sweden or to further education – Ph.D., MD etc. I happened to become a language reviewer for an Iranian female researcher living in Iran and was struck by the quality of the manuscript-just a one-person anecdote but striking.

    More than one Times reader has mixed Iran with Arab states believing among other things that Iranians speak Arabic. I expect better of Friedman.

  47. True. The Iranians I have known, and more than a few, are among the smartest, best-educated people in the world. And remarkably friendly toward the US and its people, given the interference and pain that has come to them through CIA and economic interferences, not to mention their own troubles with Iran's religious fundamentalist dictators. (And btw, Tom, they speak Farsi, and are Persian in root, not Arab.)

  48. The headline (not by TLF) asks "Is the Vacation Over?" suggesting that a number of countries have been able to fly high or avoid reform by using oil revenues from $100/oil to hide all kinds of deficiencies.

    Friedman seems to pose that question for every country but the United States, noting that "...we'll also be in for a lot of surprises" but failing to name the surprises internal to the US.

    Mark Thomason does do that: "The unintended consequence will be to fracking, oil shale, and alternative energies that all cost far more per unit of energy than the new lower price of oil." Friedman or somebody at the Times could well devote a column or two to those consequences, but who might that be?

    Not Joltin' Joe Nocera who told us yesterday that everything is going to be just fine in his fracking paradise which I see as “living in a pastime paradise (Wonder)”. I see no candidate.

    Low cost oil will affect the development of renewable energy so I offer this reason for not abandoning renewables.

    Renewables are forever – a ground-source-geothermal installation (see Champlain College) just keeps on functioning forever. A fracked shale is a one-hit wonder, you cannot keep fracking that piece of Marcellus shale, it is finished but leaves a stain.

    Understand? I hope so.

    More examples at the blog, with one being: I wrote this in a home heated by air-air heat pump using electricity generated by a mix of nuclear and hydro power.

  49. Larry,

    Methane, is also "forever" it is as common as dirt and renewable. Unlike Hydrogen it is easy to store and distribute. In fact we currently have a Methane Economy. Much of the increase in energy supplies in the U.S. Is based on the newly come by ability to extract our massive shale gas reserves in large quantities.

    Much was made here a few years ago about the "Simplistic Conservative View" that just by drilling more domestically energy prices would drop and the U.S. Economy would improve. The Liberal view here was there was nothing left to find and looking was bad anyway. It turns out that all that "Liberal wisdom" was spectacularly wrong.

    The average American has at least $40 more per paycheck in his or her pocket today, not from a Government Program but because of private market forces. Better still the Market Force people are back in control of the Congress so it's likely this will continue for a few years. Here is a demonstration, that most can understand, showing that more Government is not always the answer to every question.

  50. Cheaper oil means a new economic boom in the USA.

    Nice call: "Vacation is over", indeed, Mr. Friedman.

    Cheap oil means capital reserves held by US banks and US corporations in the trillions of dollars, along with FED stimulus capital can now be put to work with confidence. Banks will start lending money; higher corporate earnings will drive the stock market steadily upward; expansion will flow into producing more jobs, more consumption, higher GDP, higher stock prices, and best of all: higher wages.

    Oil fracking will grow more slowly. That's ok. It is Springtime In The USA and everything else will grow economic blossums in 2015.

    I myself am bored with the long vacation since the 2008 crash, and welcome the cheap-oil fed economic boom. There is nothing more exciting than a booming America.

  51. And gold coins will line the streets, and the tooth fairy will make wishes come true. You are living in a dreamland sir-- the benefit will all go skyward, to that tiny fraction of the 1%.

  52. Mr. Friedman made some very valid points regarding the unforeseen consequences of the fall in oil prices, but I am not seeing any comments or discussion on the impact that falling oil prices will have on the development of renewable forms of energy. As renewable forms of energy are dependent on fossil fuels being more expensive to make development economically viable, there is the potential for investment funding for them drying up.

    Not a fun externality to poinder considering that cheap fuels derived from the extraction industries is not what our species needs right now.
    Just a thought.

  53. It has a silver lining, Doug, I think. Tar sands and fracked gas might back off. Even though oil will be cheaper, so much of the world has already moved on to renewables. It has already taken over as a movement. Low oil prices almost appear to be its last gasp, because I think in part, it has happened as the renewable are taking over and are so much cheaper. We are the last to be let in on the news here in America, because we have been owned by these multinationals connected to fossil fuels, from banking to defense.

  54. We read in the article today: "If Putin admits his Ukraine adventure was a mistake, he will look incredibly foolish and the long knives will be out for him in the Kremlin. If he doesn’t back down, Russians will pay a huge price."

    This wasn't Putin's adventure so much as the West's misadventure into
    hostile territory. Ukraine was not ready to join NATO, and now after painful sanctions have almost forced Russia to capitulate on Ukraine,
    Ukraine just indicates by a vast majority of votes in its legislature that it is 'neutral', meaning it might choose to join NATO. This would be just another nail in the coffin. Aren't we all just waiting for a declaration of war by one side or the other?
    Any belligerence seems to have been on the side of NATO countries.
    Can the U.N. please step in to resolve this mess? And while they are at it, it would be like a breath of fresh air, finally for the U.N. to so shame the U.S., that it would give in on trying to force Syria's president out. Assad isn't going anywhere. Look how they treated Saddam, and then a few years later, after it became so clear war on Iraq had been a mistake, what happened to Libya. The U.S. supplied NATO warplanes with bombs from its large stockpiles of armaments, to drop on Libya. Thousands of hapless Libyan soldiers were burned alive in their tanks ... thousands of planes were destroyed, thousands of buildings, and now Libya is hardly recovering. ISIS is establishing its governance in the East.

  55. Is Putin still playing chess while Obama's playing marbles? Those in the media making a living criticizing what happens daily need to stop and for once take the long game into consideration before making asinine statements they will later regret.

  56. These warmongers never regret their asinine statements.They merely deny that they ever made them when it becomes obvious that they are wrong.

  57. I wouldn't be so sanguine about Islamic State going away. They are sophisticated, and have shown over and over again the ability to adapt to changing circumstances.

  58. Yes we have been on a lucky streak since 2008. We elected Obama President, who was able to help the world stay in what you call benign period of big power politics and geopolitics and took care of our past mistakes. President Obama helped us save the financial system from a major meltdown etc.

    We were never on a vacation from global instability, we always could count on Israeli intransigence in working with the Palestinians for a Two State Solution, Arab spring started with an emulation in Tunisia in 2011, then Libya and Qaddafi; on to Bahrain, Egypt, and many others including the secession of South Sudan etc.

    Collapse of Soviet Empire did not happen only because of low oil prices, Soviet adventurism in Afghanistan and then the advent of Gorbachev and his policies starting with a loss of roughly 100 billion Rubles of annual income by banning the sale of alcohol to fight Alcoholism in the Soviet Union.
    Current oil prices are not necessarily a result of market realities. It have other factors mixed in and you have eluded to a few. I am still hoping for the sake of world peace that the oil prices dip to around $30 per barrel and stays there for a couple of years. This would dry up one source of terrorist funding. Even the Saudis with trillions of Dollars in the Western Banks would not keep them funded.

    Among other recipients of benefits from low gas prices are the working people who would use the savings totally on other essentials and give a boost to the economy.

  59. Time's up for the Grand Old Petroleum Party and the Greedy Old Polluters, too.

    Solar, wind, thermal and biomass technologies will continue to wipe dirty oil and coal off the map.

    Technology has decreased the cost of wind energy by 43% in four years, and wind will supply 20% of the US power grid by 2030.

    The US installed 4,751 MW of solar PV in 2013, up 41% over 2012.

    Solar accounted for 29% of all new electricity generation capacity in 2013, making solar the 2nd largest source of new generating capacity behind natural gas.

    Roughly one-third of all the nations of the world are developing their geothermal resources.

    Hydropower is the largest source of renewable electricity in the US, responsible for over half of all renewable electricity generation last year and 7% of total generation; but it will grow slowly.

    The first grid-connected offshore ocean tidal generation unit in the US was completed in 2012, built by Ocean Renewable Power Company in Eastport, Maine.

    Ten million American households, 300 colleges and government buildings, and 500 combined heat and power facilities used biomass (wood and agricultural residues) for part or all of their thermal energy needs in 2013.

    Ethanol helps too, but we'd be much better off with Brazilian and Cuban sugar ethanol than wasteful Iowa corn-fed ethanol.

    And waste-to-energy is a proven technology to generate clean, renewable energy from municipal solid waste.

    So long, petro-dictators.

    Hello, newer, smarter, cleaner energy.

  60. fantastic post!

  61. Nicely said, except for ethanol - a losing proposition all around. No significant direct impact on carbon dioxide, and a huge impact on forests and grasslands.

  62. Socrates, I will put your superb comment together with Carolyn's and mine from Nocera (yesterday). The three together can become Renewable 101 for such as Nocera.


  63. "The years between 2008 and late 2013 were — relatively speaking — a rather benign period of big power politics and geopolitics." We should not be celebrating any such blessings as this, considering we hardly deserved any blessings as a result of our misadventures in the Middle East.

    Not only are declarations of foreign policies most ill-conceived, still being made, and being sadly reinforced by journalists who apparently are simply riding along with bad leadership, and regretfully not stirring any needed debate on matters ...
    but these declarations have been reduced to imperial ultimatums devoid of any morality. It is not so strange this has happened, because of the continued decadence, and decline of any morality. No longer any Golden Rule to be abide by. The 'almighty Dollar' rules in both Congress and in the Executive branch.
    And, this shows most vividly, in the actions and words of presidents ever since Ronald Reagan's presidency, or J.F. Kennedy's.

    We have first been declining in having a faith that can sustain the greatness of the U.S.'s Constitution, then secondarily ... been declining as a result of ceasing to hold to the standards of both excellence in pursuit of meaningful goals, and of any abiding faith that can yet coexist throughout this sad descent into both mediocrity and loss of any conscience.
    Our leadership has just not been up to the task.

  64. Mr. Friedman time after time tends to harp on an individual factor or phenomenon and then build a house of cards based on his theory of the week. Like a house of cards it all comes tumbling down.

    The Russians now might indeed be in increasingly dire straits because of dropping oil prices, but to see the events of 1986-1999 in terms of oil prices and repercussions of those prices is somewhat simplistic. Yasir Arafat "recognizing" Israel due to the results of lower oil prices? Yes, Mr. Friedman writes "other factors were involved in all these events" and then returns to his monolithic view of history.

    "Other factors" are and were involved and a monolithic approach to anything is not very helpful.

  65. Regarding Russia, it will be a mistake to push Putin and the country into a corner. Given Russia's natural resource, human resource, and generally pro-western culture, it is actually a natural ally of US and Europe. Our mistake after the fall of the Berlin war is the humiliation of this once proud country. While Putin will always remain a dictator, we should show Russian people that the west can be a friend.

  66. Nobody humiliated Russia. Quite the contrary. We send teams of economists there to help restructure the monetary system and provided loans to assist in the transition. The money all went to the "well connected". They built there own house of cards here and the Russian people continue to get screwed.

  67. Unsaid is that low oil prices reflect increased production of crude oil which will be refined and burned into CO2. So the really important point, historically speaking, from the downturn in the market, escapes Friedman. Surprised?

  68. Vacation is not over, it just started for majority of the world population. Oil is still the prime global energy source. Lower energy costs always stimulate economy with beneficial consequences across the board. Although it does encourage waste, pollution and a little global warming because the coal prices are dropping as well. The OPEC and big Oils enjoyed the boom for too long with artificial price fixing. Now it's the consumers' turn to relax and enjoy the long deserved vacation for a change.

  69. If I were a grand geopolitical thinker (I am not), I could find many causes for alarm at the moment around the world. It doesn't take decades of study to realize that when the existing order shifts dramatically, problems, like wars, often ensue. The roots of conflict before the two world wars can be found in just such shifts, which left nation states staring at blank options, so they made war because, in part, those in power didn't know what else to do.

    The lower price of oil is not merely taking away candy, it is meat and potatoes, and hits hard in the places that hurt where nations, like Russia, are built around a single economic driver. In contrast, this has been one of the historic strengths of America: the multiplicity of sources of economic stability and growth in our productive capacities (an advantage we have tossed aside, in a major way, with offshoring and outsourcing for the temporary gain of huge profits and, yes, Apple Computer, I mean you).

    If it lasts a full year, the current price of gasoline is estimated to leave 260,000,000,000 dollars in the hands of American citizens. That's 260 billion that will not be going to Russia (Lukoil and other brands), nor to Venezuela (Citgo) nor Saudi Arabia (many brands). It is a bit like pulling the chair out from under a 330 pound man at the last second when he is descending heavily. Ouch.

    This is, indeed, a time of peril and the first few months of 2015 should give some indication of the direction.

    Doug Terry

  70. Mr. Friedman, I can't imagine how the US can escape the tensions and fallout from falling oil prices. Sure, the average American is benefiting tremendously from lower prices -- and the oil and coal barons in Kansas and elsewhere certainly are gnashing their teeth--but when you have such a reversal of price stability in energy, it can't help but "go viral" so to speak.

    When I see the US stock market surging, and oil prices falling so dramatically, I fear we're in for a jolt. Nothing as skewed as this disconnect can last forever. And, financial turbulence has a way of hitting home from whatever its source like we saw in the great economic meltdown.

    Restive markets produce restive national populations, and Putin may be in for a long, hard ride as his self-created capitalists learn the hard lessons of free markets: they don't last forever, and the can come tumbling down in a nanosecond.

    As we hurtle towards 2020, it remains to be seen what kind of new world order will emerge from our interconnected economies--without the financial glue of oil that held so many factions together.

  71. Thank you Mr. Friedman, for penciling in the lines connecting the dots. I will be looking forward to how you connect those dots in ink as we go thru 2015.

  72. Two comments...

    First, cheap oil will make it easier for Venezuela to ship some of their production to Cuba, so I don't buy Mr. Friedman's argument that low oil prices are tied to improved relations between Cuba and the U.S.

    Second, my concern is that in order to hold onto power Mr. Putin will be forced into the typical last resort of macho rulers: tell your people that they are victims, identify enemies that are persecuting them, use the media to generate nationalism, and justify a war. Low oil prices could be bad for Ukraine or another neighboring state.

  73. Clearly Eastern Europe became a hot spot for insecurity and war like confrontations more dangerously than the entire Middle East.
    Our luck is of course the fallen income of oil revenue and sanctions
    to stop the military build up and possible further invasions.

  74. I wouldn't be so sure about Russia. Last year Russia had a trade surplus of 150 billion dollar. So its fundamentals are quite strong. The recent fall of the ruble was the product of the US cornering the valuta market with sanctions and trying to undermine confidence in the ruble with propaganda. But such tricks don't work forever.

    How things work out will depend very much on how the Russian authorities play their cards. But it could very well be that in the long run the present turmoil will be positive for the Russian economy because it speeds up its adaptation to the lower oil price.

    We have heard the story that the pain of sanctions will lead to the fall of governments many times. But in fact it seldom works. On the contrary, nothing unites a population better behind its leader than a foreign enemy who is trying to hurt their country. When a change in the price of raw materials makes a government weaker it is nearly always when this was not the result of a deliberate attempt by some foreign nation to destabilize that country.

  75. Russia's balance of trade has plummeted over the last 6 months and the Ruble has as well. That might suggest that Russia's fundamentals wouldn't meet the definition of "strong". And those 2 factors continue to head downward. Their most important and most basic fundamental, however, is Putin, who is totally incapable of running a country.

  76. I don't believe Russian history supports your argument.

  77. Evidently you are not familiar with the costs of extraction. Your entire argument is thus flawed.

  78. Cuba burying the hatchet!! you got to be kidding Tom. I thought it was the other way around, wasn't it the US that invaded and then embargoed the Cubans for the past 50 years!!

  79. With all that news, I wish Thomas Friedman a Merry Christmas and may the New Year be better than predicted!

  80. Well said, Mr. Friedman. In short, Vladimir Putin is in deep trouble. He is an arrogant man who is now--or soon will be humbled.

  81. A couple of warning, "down the throat", non-nuke missile shots at Ras Tanura should easily pop the price, to say, $120 pretty quickly. And if they were "mini-nuke", well, $150 to $180?

  82. I hate to break it to you, Mr. Friedman, but it's not just about oil. Many of us are still reeling from the global financial meltdown. What we hear from the government about good everything is propaganda.

  83. I believe that a re-read will prove that Friedman is not discussing the financial status of US citizens in this column; I would bet that he would agree with you that our nation is still climbing out of the crisis of 2008. The topic is the impact on those nations that depend very heavily on oil products.

  84. Are you White, male, republican... Do you read and log onto the NYT's only to post complaints? Factually the statistics the various governmental agencies compile are of accurate. Then, you seek confirmation bias.

  85. This too will have its day. Natural gas follows the same arc of supply as oil as most people know. The supply of oil is diminishing as expected. The evidence is the kind of oil we are in a race to extract..the dirty hard to get kind..the fracking required, which by the way the Russians do not need to do to get their natural gas. Renewables are inevitable. Even the oil companies say so. But they are hanging on to the last of their revenue stream as best they can. The sooner America wakes up and starts building a renewable energy infrastructure, the better. We need to take a good look around us at what is happening in the world in renewables and get busy with it. That building of the infrastructure will be what saves America. Nothing else will do the trick.

  86. In evaluating the effects of oil price declines, one must look at both supply and demand. Mr. Friedman discusses only supply. Demand has been instrumental in keeping oil prices high and stable. Demand is now instrumental in reducing the price of oil.

    The oil market is a dollar denominated market. Outside the United States people actually pay for oil (gasoline, other petroleum products and energy) in their domestic currencies. Oil consumption mirrors the state of the domestic economy. Domestic currency must be converted to dollars in order to replenish the oil inventories.

    Currency markets, government policies and consumer demand determine the domestic currency price of oil in countries outside the United States. My intuition is that oil prices, in domestic currencies, are not dropping and that oil consumption is dropping particularly in the European Union as a result of economic austerity policies.

  87. You forgot to mention the other major oil producers - USA and Canada with the huge amounts of shale oil they're taking out of the earth.

    What do you think will happen to those countries and the greeedy oil producers?????

  88. While castigating Mr. Putin, we should not forget that a strong Russia held the gate against the Muslim invasion of Southeastern Europe for several centuries. Until all of Islam can be brought under some semblance of religious toleration and democracy, we had better hope that Russia remains a strong player on the world stage. In the perspective of the longue durée, the era of Stalinism was the last gasp of totalitarianism in Russia's space. Putin is nothing more than a punctuation mark in Russia's long history. We'd be better spending our energy taking care of nascent totalitarianism here at home, under the direction of the Kochs.

  89. The great thing about a crystal ball is that whoever reads it is never wrong. You cannot be wrong abut things that have not happened yet. Mr Freidman is free to predicte the sky is falling but with all human. Eh aviod, it is unpredictable and not based on reason or logic. But never the less it was fun reading his predictions. Let's hope some come to pass and many do t!

  90. Mr. Friedman's stock in trade is to predict the sky is falling.

  91. When an equilibrium is disturbed, unexpected things can happen.

  92. Friedman skipped the original oil sin which is the West propping up oil dictators to assure access to cheap oil.

  93. Crashing the oil market was a bonanza to short sellers. Billions were made. That money is on deposit somewhere. How about letting us know who cashed in on the crash and who holds the pillage?
    What's going to happen next? Typically a crisis, or a catastrophe somewhere and then a steep ride back up to $150 a barrel. Who will profit then? The same traders who cashed in on the crash.
    What a columnist could do to end this manipulation of the global economy: expose the perpetrators, advocate for renewables that will end our addiction to oil. I know that Tom
    Friedman is up to this task. He has the gravitas and the sources. I look forward to a year of insightful reading!

  94. If we were smart, or had a plan, we would offset the drop in oil price by increasing the gas tax and use the increased revenue to promote transition to renewable and sustainable energy. This would cause little disruption to the existing economic status quo and be a relatively painless way to get closer to where we need to be, which is off dependence on the consumption of dirty, climate impacting fossil fuels.

  95. "If we were smart, or had a plan, we would offset the drop in oil price by increasing the gas tax and use the increased revenue to promote transition to renewable and sustainable energy."

    And when revenues fall because oil and gas aren't being used as much, would you raise the taxes on them even higher? Or would you raise taxes on the renewables because they are being used more?

  96. Clean water is more valuable than oil now.

  97. "average is over for workers in developed countries, and everyone needs to be upgrading their skills"
    Though not directly related to the topic - the thinking in the sentence above is ridiculous. People who are 50+ are not just required to upgrade their skills (hard as it is), they are required to learn new skills as old skills are not required anymore. Further, they have to learn those new skills and work for a pay that is less than someone in Asia would get for those same skills. An impossible task. So we should stop repeating that nonsense. There was a healthy balance between capital and labor until Reagan. We freed the capital to move where the cheapest labor is and gave access to large amounts of capital virtually at zero interest rates. This whole globalization seems to be a capitalist plot to benefit primarily large capitalists at the cost of - initially labor in the developed world and then, as more and more automation kicks in - labor even in the developing world. See the steady movement of wealth from people who labor to people who own capital. There is no meaningful conversation happening anywhere in America is amazing. People have bought into the hogwash of lower taxes for the rich, low interest rates for capital and unbridled export of jobs and no duties on cheap imports. The latest budget bill again gives more to the rich and closes none of the loop holes of the tax avoiders/evaders like Apple and hedge fund owners who pay 15% rate. Sickening!

  98. " This whole globalization seems to be a capitalist plot to benefit..."

    We've had a "global economy" since the dawn of civilization. Even in the days of Rome (and probably even before that), trade existed with China. Before the British Empire, the Dutch were always looking for new markets as far as their boats could sail. Columbus was looking for a shorter trade route not for those despised capitalists, but for the state.

    It is when business curries favor from the state for the mutual benefit of both do we see distorted markets.

  99. Tom's new book is about the "end of average." He is just setting himself up to sell more books with his use of that sound bite in this column. If we are lucky, most people are average, and the reality is, the world is full of below average people, and we don't get to just turn our backs on them for the crime of being not a superstar.
    MJ-- your points are fantastic and give me pause-- are you really from texas?

  100. Our oil reserves, worldwide, are finite.
    Our world's population is steadily increasing.
    These falling oil prices cannot last.
    If it seems just too good to be true, it is.

  101. All of our resources are finite. Commodity prices always fluctuate, based mostly on supply and demand. And the price of oil will adjust to market conditions. I just don't like it when government tries to dictate what the price of anything should be.

  102. "Putin can’t relieve the pressure without a lifting of Western sanctions. That would require him to reverse his seizure of Crimea and intervention in Ukraine."

    Naive to believe Russia would or should give up Crimea. Russia's Black Sea Fleet based in Crimea protects its only warm water port access to the oceans. A potential blockage of its naval base in Sevastopol buy a NATO Ukraine (plus the loss of Russia's base in Tartus, Syria) can appear to Russia to be a profound threat of being bottled up from maritime access to southern Europe, the south Atlantic, North Africa and the Suez Canal.

  103. If Putin had not unlawfully annexed Crimea their would be no problem. I f he had sat down with Ukraine and worked out any problems that there may have been in their relationship, if he had not tried to control Ukraine with his puppet Yanukovich, there would have been no problem. All of this rests at Putin's doorstep. I wonder how long before the oligarchs have a "come to Jesus" conversation with him.

  104. The notion that Putin "unlawfully annexed Crimea" implies that Russia has had no legitimate interests in Crimea. That Crimea has been part of the Ukraine in recent history has been almost an accident. In 1954, the Russian Soviet Republic transferred Crimea to the Ukrainian Soviet Republic as a "symbolic gesture" driven by the then General Secretary of the Soviet Communist Party, Ukrainian Nikita Khrushchev, to mark the 300th anniversary of the Russian Empire.

    Russia has long maintained naval and aviation bases in Crimea which are vital to protecting Russia's legitimate right of commercial maritime access to the Mediterranean Sea and, therefore, to Southern Europe, Africa, the Mid-Atlantic and the Suez Canal." Russia reasonably reacted to the conceivable loss of Crimea to NATO, perhaps, in the same way the US would react to the idea of Panama joining a military alliance with Russia or China.

  105. I think more long term---how will we react when Manhattan is under water?? Markets go up and down, pipelines come and go, but snorkeling down to the Deli, well, that's when you really know the vacation is over.

  106. I don't see one country on your list in which are found free speech, human rights, and some form of democracy. It is possible that this downturn in oil prices is natural if belated, a revaluing of oil in a world where it has been overvalued for forty years.

    World economies seem to be prone to hijack by industries. First, the sheikhs and now the bankers and arms manufacturers. As a nation, it would seem to be in our best interests to impress upon our representatives that we would like them to fight back with everything they've got against these monied, corrupt interests.

  107. A small storm is often needed to freshen the air. The removal of Putin, at least reducing his power, both domestically and internationally, will make the world a safer place to live. He is not fit to have so much power.

    One of the most militarily powerful nations in the world is headed by Vladimir Putin who for 16 years served as an officer in the KGB. He is 5'5" tall and an expert in martial arts. He has a PhD from Leningrad University.

    He is acting like a man with an inferiority complex. Perhaps it is his height or seeing the perceived power of his country diminish as the Soviet Union collapsed on the world stage. In the west success of a country is defined by how well its citizens are doing, the opportunities and how much freedom they have to pursue their hopes and dreams. The military is present to protect these dreams and aspirations.

    Putin's focus is not on improving the daily lives of Russians. His is focused to bring back world glory to the Russian nation. In the U.S. the military is necessary to protect our citizens in pursuit of happiness. Putin sees the power and glory of the state as the priority and the aspirations of its citizens as secondary.

    We recognize there are leaders of other nations that see military might as a means of defining their countries relative success in the world. Unfortunately Putin sees the world this way....

  108. Wow, you are seeing a different west than I am. "defined by how well its citizens are doing, the opportunities...and freedom..." That's not how I see this country at all-- not with increasing economic inequality, underfunded schools unable to offer a 21st century education to all, the world's largest prison system and highest incarceration rate, young people too in debt to student loans to "pursue their hopes and dreams." And I sure would not look to the military to "protect our pursuit of happiness." Look at what happened during the Occupy movement and some of the recent protests-- paramilitary attacks on people practicing their 1st amendment rights!

  109. I am thankful that Obama is in charge during this time of turmoil rather than George Bush and Dick Cheney.

  110. When TLF writes the following he could be writing about the USA, if you substitute Iraq and Afghanistan for Ukraine and Americans for Russians. In fact, we have already paid a huge price (measurable in the trillions of dollars and thousands of bodies, plus innumerable opportunity costs) for not leaving Iraq and Afghanistan.
    -- TLF quote ----
    "If Putin admits his Ukraine adventure was a mistake, he will look incredibly foolish and the long knives will be out for him in the Kremlin. If he doesn’t back down, Russians will pay a huge price. Either way, that system will be stressed with unpredictable spillovers on the global economy."

  111. Let this serve as a lesson to Turkey under the repressive leadership of Recep Tayyip Erdoğan. Just because it is a member of NATO doesn't mean that we agree with his tough leadership including equating birth control with treason or siphoning off money to build the opulent Palace of the Porphyrogennetos for himself off the backs of his people. As the people of Ukraine are eager to enter NATO as a cure all for years of corrupt governmental management, they might want to give close scrutiny to how well NATO as served other countries which border lawless states like Syria and Iraq. They will learn that NATO membership didn't always go hand in hand with support from the U.S. and EU.

  112. Erdogan's ego - like Putin's - won't let him learn any lessons. However, if falling oil prices helps speed his (and AKP's) permanent departure from politics, so much the better.

  113. "they might want to give close scrutiny to how well NATO has served other countries"
    Boy have you got that right.

  114. That would be Turkey's salvation. In fact in the end, having well governed secular societies that respect all humanity is essential for the ME to find stability, peace and prosperity.

  115. Mr. Friedman notes, “This allowed the major economic powers — the United States, the European Union, China, India, Russia, Brazil and Japan — to focus almost exclusively on economic rehabilitation.”

    To sustain economic stability and geopolitical advantage, these economic powers need to have a combination of abundant natural resources and growing human intellectual capital. From Mr. Friedman’s list, it is apparent that the U.S., China, India and Russia meet these criteria for the foreseeable future.

    However, human intellectual capital tends to get stifled under authoritarian regimes and when you combine that with a “significant urban middle class,” which has become “used to traveling abroad, owning a car… consuming Western goods and seeing how the rest of the world lives” then China and Russia begin to lose both, their economic stability and geopolitical advantage.

    To be forewarned is to be forearmed, as the saying goes, so let’s hope that the Chinese and Russian regimes are not banking too much on the stoic nature of their respective peoples. So, Mr. Putin and Mr. Xi, please note that your own more recent and relevant histories have shown that both, prosperity and power is best maintained when it flows from the people.

  116. The slump in price oil seriously affected Putin's initial calculation that Europe and the west will not dare enforcing an embargo because of their reliance on Russian oil and gas. I think the whole situation was handled very subtly by our cool hand Luke President instead of arming Ukrainians or sending NATO troops as suggested by many in the U.S. congress. That being said nobody has anything to gain from Putin losing face; I hope we've already started backdoor discussions on how to lift sanctions in exchange of a progressive evacuation of Crimea which can become an autonomous province in Ukraine.

  117. Good idea..but not sure what autonomy you are talking about with Chevron in the area of the Ukraine.

  118. I am not too sure that I accept Mr. Friedman’s rather aging hypothesis about the role of the Middle Class ensuring good and stable governance.
    The American Economy has decimated it’s middle class over a period of many years and the country is still governed by a small clique of uber wealthy(i.e. the making fundamental as distinct from the decorative decisions). Plenty of bread (celebrity) and circuses (wars of choice) have been enough to keep the population in line; and there is always the Patriot Act for later.
    The comments by Russia’s former Finance Minister “There will be a fall in living standards. It will be painful. Protest activity will increase” sounds rather like the wishful thinking of many leaf leaning politicians in the ‘West’ when trying to confront the marketist economic ideology.
    It is also instructive to consider that the drop in Oil prices will affect the economic viability of Oil Production by USA a destabilising possibility that seems to have been missed by Mr. Friedman

  119. I agree with your last point. At $60/barrel the shale boom goes bust. That migration of workers into the shale fields will turn into an exodus of unemployed young men. Hopefully they will find employment installing solar panels and insulating older buildings.

  120. The problem with this analysis is that the Japanese and European economies are hardly tan and relaxed. They are just on the edge of recessions due to terrible policies. If the globe is about to be plunged into instability there will be a lot of recriminations that the vacation was not used more wisely.

  121. Why concentrate so much on the global economy without mention of domestic issues? The big question for us down in Houston is: did our City learn from the 1986-1999 oil glut? That period coincided with a long, sustained downturn here. Are we to expect another downturn in our local economy with this oil bust?
    There are reasons to think we won't. In my profession, architecture, school construction bonds seem to be pulling us along without major layoffs. Houston also has a big bio-medical sector that is not experiencing a downturn. But still, one can't help but worry for our local economy here when oil prices fall. And forgive me, these concerns trump any worries I might have about geo-politics.

  122. Houston could benefit by switching gears to renewables. It's a whole other universe of possibilities as demonstrated in other parts of the world. I hope Houston thrives. Have a Merry Christmas.

  123. @Carolyn Egeli: Texas already generates more wind power than any other state in the US, and a lot of the companies doing it are based in Jouston - so we already are making the switch to renewables.
    Merry Christmas to you.... And Mother Earth..... And hopefully this is another thing that prevents today's oil slump from causing a replay of the late 1980s and early 1990s in Houston.

  124. The author says "The political and geopolitical fallouts will be varied — good and bad — but fallout aplenty there will be."

    I wonder how many Friedman Units it will be before we see the fallout.

  125. Mr Friedman " The Western sanctions on Putin’s banks, combined with the sudden sharp drop in oil prices and capital flight also triggered by the sanctions, mean that Russia has a dangerous gap between the funds flowing into its economy and what it needs to send out to pay its debts and finance its imports. Putin can’t relieve the pressure without a lifting of Western sanctions. That would require him to reverse his seizure of Crimea and intervention in Ukraine."

    Friedman's assertion above was sound 10 years ago but not entirely correct today.

    China can play the role of lender of last resort and provide Russia with foreign currency swaps and avoid corporation defaults. Obviously, the Kremlin will take a hard look into all possible consequences of Russia becoming China's dependent.

  126. As I pointed out in comment on the Krugman column Monday (which was not deemed suitable for the Times I guess), take your calipers, set to short range nuke missile separation, put the point end in the middle of Crimea and make your part circle over Westward. What do you see...

    That Hungary, Romania, Bulgaria and a good bit of West Turkey are within that line. Without Crimea they are not under the gun. Under the gun they are likely to be careful NATO votes...

    It is a military and existential thereby matter to Russia, not merely demon Putin, and it will never be given up...which is why what happened in the face of a slick coup in Kiev did...the Stalin size vote to join Nato we see now would have been to evict Russian bases from Crimea had there not been an intervening event.

    There is a fair chance, once the Western engineered attempt at panic recedes and Rubl and Oil price rise again that Putin's desire to play "marbles" (economic competition) will continue, otherwise the Euro- so convenient to avoid money changing for every country in EU to Russia still- becomes worthless to Russia and can be attacked in a way that crashes it.

    In as far as the war game (chess) goes, the flank stabilizing rook of Crimea will be defended to the mushroom cloud.


  127. Lower oil prices provide the stimulus Republicans opposed. Lower prices put more money in peoples' pockets, allowing them to spend on other things and hence increase demand, which has been insufficient.

  128. You mean the house of cards is wobbling?

  129. Gosh, I don't know what to do with all this "good news":
    a. The American economy is "growing" at a 5% rate
    b. Americans are finding more jobs available
    c. Inflation, what inflation? Gas is cheaper, bread is...not (so a little smidgen of bad news)
    d. Vladimir Putin is a jerk!
    So tell me, do you fellows who write columns get out much?
    Sure Wall Street is setting records almost as if the "Big Board" is some kind of video game. And, just like a video game, there are winners (the 1% who's economy is actually growing) and losers (the rest of us who can pick from any number of 30-35 hours a week job, receive NO raises nor overtime and because these jobs aren't "full time", scant or no benefits). Coupled with people like the "Chamber of Commerce", a wholly owned subsidiary of the GOP/TP, the chances of a minimum wage increase is pretty much nil since they're in control (they contribute lots of money).
    As for the gloating over Mr. Putin's "dilemma", just remember, traditionally the "invasion season" in the Slavic arena is springtime: not nearly as cold and the ground can easily support the passage of thousands of tanks.
    And yes, maybe the Russian "oligarchs" aren't made of the stern stuff of the "proletariat", but, like most of our "leaders", they aren't the guys who do the "heavy lifting" when it comes to real combat.
    All in all, when was the vacation exactly? I missed it.

  130. Tom worry about the economic problems of the NYT more than the price of oil

  131. Following this to the inevitable conclusion we will face total chaos when there is no more oil. I know someone will synthesize a substitute, maybe they already have. We are a petro-economic world. Everything we do is based on oil somehow. Our lives revolve around it and our lives depend on it. Oil is power and the lack of oil creates a power vacuum.

    Maybe this is the point to driving the prices so low. We can watch the destabilizing effect on a huge arrogant country. Putin's Russia is our laboratory and the spiraling drop of oils is the catalyst. We can see first hand how these stoic Russians handle their next economic and physical fall caused by misunderstanding capitalism. Maybe we're forcing Putin's hand to abandon his idealism and adopt our version of the world as we draw it.

    So what happens when they pump that last barrel and refine that last gallon of gasoline? Will we start trading wind futures? Will wind tunneling and wind farming become the investment of the future? Do you think Congress will outlaw the old fashion breeze-way?

  132. A lot of knock-on effects of course. But there's a huge overlap between the worst affected and the worst actors. I can't say I'm sorry.

  133. “The political and geopolitical fallouts will be varied — good and bad — but fallout aplenty there will be.”

    You missed the hail and fire from the sky, the water into blood, and the swarms of locusts. Your crystal ball must be a little murkey. Could be a software problem, or North Korean hackers.

    Merry Christmas and a Happy New Year.

  134. I would propose that, like the last time around, falling oil prices will be beneficial on the whole.

  135. This a needed warning during our crawl out of the Great Recession. While things look good, the levers that make gas so cheap--a big reason for things looking good--are also causing wide-eyed and nervous adjustment in countries that have based everything on fossil fuel income. What will their desperate reach look like? How should America prepare?

    Probably our most vulnerable front, and easiest to attack at arms length, is our internet communications and digital commerce. Like North Korea, Russia could get desperate and swing for the fences with some grandiose hack ploy aimed at restoring national pride and and easing western sanctions. I fear a desperate Putin knows no limits in his quest to save face.

    Perhaps we should look to easing sanctions with a message of concern for Russia's people and a concern for our economic well-being, seeing how everything effects everything. Still hold a hard line against the Crimea grab, but ease sanctions to help stabilize what could be volatile situation.

  136. It would be nice to know what Mr. Friedman's standards are in defining 2008 - 2013 as "a rather benign period of big power politics and geopolitics."

    Says Thomas, "The last time the world witnessed such a steep and sustained drop in oil prices — from 1986 to 1999 — it had some profound political consequences for oil-dependent states and those who depended on their largess."

    Thomas could also look at a time when oil prices were relatively high - the 1970s and early 1980s - and find Iraq and Iran fighting over control of the Shatt al Arab waterway. The turmoil surrounding the fall of the Shah, the Iran-Iraq war and our eventual siding with Saddam Hussein. None of that had anything to do with falling oil prices. Mr. Friedman could also look at the formation of OPEC in 1960 and major changes that occurred when it raised oil prices in 1973 to punish us for supporting Israel in the Yom Kippur War. It is possible that OPEC is playing along in order to find where the cost of production here exceeds the global price. But the price will eventually bottom out.

    Lower prices at the pump have translated to more money in the pockets of most people, including Mr. Friedman. As long as gas is cheap he and others in the green energy movement will have a harder time selling their views. But if the elimination of oil and gas is so important to Thomas, how does think the world's "interconnected and interdependent" economies will react?

  137. Please note the Arab countries contribution to patents outside oil and gas exploration. This will tell an interesting story about these countries contribution to world growth.

  138. Are you suggesting, Mr. Friedman, that we are to blame for the Soviet Union's hostilities toward its own people and its destabilizing activities the world over, for Iran's support of terror and its treatment of its own citizens, especially women, for the governmental crimes in Egypt, for the Palestinian-Israeli conflict, and more of the world's woes, simply because we were willing (forced?) to pay so high a cost for energy?

    If that's so, we could accomplish so much good in the world by withholding our petro-dollars instead of paying the much higher price in terms of our young soldiers' lives and injuries.

  139. This article, ironically on Christmas Eve, proves, once again, that power politics/geopolitics is all about money--specifically, in this case, the price of oil.

  140. But of course, no army can fight with an empty stomach. So it is imperative for the civilized world to starve outfits like ISIL, Al Qaeda and Taliban out of existence.

  141. Mr. Friedman writes that Iran, just like Arab states, uses its oil money to mask their deficit in knowledge, education, and women's empowerment.

    Where has he been hiding during the past?

    Not only does Iran have an excellent public education system - one that outperforms the ones in many of our red states - but allows women to drive, attend universities, and allows them to dress in western style with the only exception to cover their hair. And even the latter is being protested against by many, woman and men alike, lately.

    As to Putin giving up Crimea for a 'deal', he is dreaming as well.

  142. As Friedman notes, there is pro and con to every major economic shift. The effects of inflation or deflatino on individuals and institutions is largely dependent on whether they anticipated it correctly, or not. Cathybeth's comment below is the typical view - that people paying lower energy prices will spend the saved $$ on something else, and the US economy will benefit. But not necessarily. The most important determinant of whether a dollar spent is good for the US economy is: how much of the value-added of that product occured in the US. If people take a dollar spent on energy produced in the US and spend it on foreign-produced goods or services, the effect on the US economy can easily be negative. ( I say this as an economic development professional and economist for a few decades). Meanwhile, the negative economic impacts on more sustainable forms of energy might be hugely devastating in the short- and long-runs for US entrepreneurs and investors, with a lasting effect of investor shyness for future technologies that would allow us to live more sustainably (i.e., not hurting future generations' prospects). Fossil fuel consumption that threatens climate stability becomes more likely; with predicted climate change we might see 25% reduction in agricultural productivity in coming decades, at huge economic and individual costs. The overall pros and cons, especially in the long-term could easily be negative for the US instead of positive.

  143. Yes Russians got used to western goods, but keep also in mind that by now most of the 'western goods' are made in China, which could certainly start selling similar products to Russia in no time.

  144. Mr. Friedman, the things you know about you know about. But the things you do not know about you not use your column to make sweeping declarations about.

    In part this column rests on the assertion that Russia is one of the world's economic powers. It is not. It is an economic basket case.

    Russia's economy is a Potemkin village, 60 percent or more based on the exploitation and export of oil and natural gas. Russia makes almost nothing the world wants or needs except weapons -- even Russians don't want what Russia makes. Russia imports much of its food and certainly the better parts of it like quality produce and meats.

    So Russia is a real danger when the oil economy that is its basis collapses and when that danger takes the shape of Mr. Putin we all need be beware.

    But never confuse Russia with one of the world's economic powers. It's only economic power is to confuse, obfuscate and interfere. The only ones who can change that are the Russians and they are the most subservient people on the fact of the earth given that whether they call their leader Tsar or General Secretary or now President, always they submit to the despot, to tyranny and to the lies they tell themselves and the blame they place on everyone else for their troubles.

  145. I appreciate the complex and sophisticated analysis of the dynamics of the shifting of the balance of power within and among different countries. The low cost of oil, however, has done much more good than harm, in my opinion. Without money to prop up corrupt and tyrannical regimes, there is an increased chance for more positive outcomes. Clearly, the jury is still out on the effects of the Arab Spring, which has produced great hardship. But I believe that the hardship was always there. We didn't know about it because of the censored press. State control of information is no longer possible in the age of instantaneous communication. The airing of dirty secrets provides a transparency that never existed before. But it also permits horribly cruel beheadings of innocents slaughtered by terrorist extremists. What we have now is a mixed bag, and what will come out of the shifting balance of powers will also be a mixed bag. Let's just hope that bag doesn't contain too many poisoned apples.

  146. Isn't the "slump" in oil prices mostly a Saudi contrivance? Aren't the Saudi's "dumping" oil?

    If so, then "we" are and have been just as manipulated as Putin and the rogue states. Every time oil prices go up (read: OPEC cuts production) Republicans blame Barack Obama for something, and now that oil prices are going going down, (read: Saudi Arabia "dumps" oil onto the market) investors in alternatives whose price point was just becoming competitive have the rug pulled out from underneath them. (Oddly, Republicans not crediting Obama.)

    I am more worried about Saudi control of world economies, than temporal thugs like Putin. It's time to put a floor on gas prices, and cook up a full-blown, long-term energy policy.

  147. Not really. The U.S. Shale has been pumping. And regardless of pricing, the countries who use oil revenues as a way to placate the masses will not want to curtail. So the Saudi decides it is not going to hold the bag, even though it too has huge social obligations to quench the masses.

    So it is a perfect storm. At some point, there will be attrition. But let's hope some of those emperors without a moral clothing will be knocked out of the musical game.

  148. Just how did President Obama contribute to the recent fall in oil prices? I would suggest that the real cost driver is the shale oil and gas that is being extracted from the ground with over 1million new wells drilled on private lands without the benefit of the Governments assistance has more to do with it rather than anything else.

  149. That shale oil costs much more to produce and will soon be out of the marketplace altogether. ND ghost towns. Get used to them.

  150. Why is Mr. Friedman continually making deprecations against Vladimir Putin?
    He wrote: " ... Turkey’s increasingly tyrannical president, Recep Tayyip Erdogan, who has been arresting domestic opponents, is looking like “Vladimir Putin Jr.” It is because now U.S. policy is making imperious ultimatums regarding Russia and anything it would be doing about NATO nations trying to establish control right next to Russia's motherland. Recently Vice Pres. Joseph Biden was in Ukraine and said Russia must exit the Crimea, or punishing sanctions will continue.

    We have foreign policy today that works like this. Pres. Obama first can't make up his mind. Then finally he makes a declaration. The Democrats all agree to it as gospel to follow on. The media chimes in with it. There can be no further discussion on it. You can't argue against it, because the people are like sheep, and mostly go with whatever big media proclaims.

    But as to Syria, this very way our foreign policies have been done, has led to disaster: Over 3 years of devastating war. I read that at least 260 cultural heritage sites in Syria have been damaged, and just like how in Iraq their National Museum went unprotected. The U.S. simply doesn't care.

    And it's true that more Syrian soldiers have been killed than terrorists. Almost worse than 200,000 killed is how about a third of Syria's entire population have been driven from their former homes. Whole towns flattened! America has lost its conscience.

  151. You are rambling. Yours is a disjointed critique of American foreign policy that is Syrian-focused, having started with some confusion as to why Friedman is picking on Putin. Maybe that had something to do with his decision to destabilize and invade Ukraine, but never mind. Not sure where Syria and America's failure to somehow stop that bloodbath has anything to do with the price of oil.

  152. So, Mr. Karch, let's review: Paragraph one, an apologia for Putin. Interesting choice and placing of the word "motherland;" Paragraph two, a tired and unpersuasive critique of Obama's decision making process (not the decisions, mind you, the process) and the "lamestream media." Then there is this: " You can't argue against it, because the people are like sheep." We so stupid, why you buggin' us in the bitter heart of the lamestream media? Paragraph three, "Poor Syria. All those heritage sites!" (I love that -- awesome moral center at work.) And besides, lots of refugees and casualties. America should go in and fix it.

    I will keep it simple. You have no idea what the American public wants or their mood. There is not a consensus, or anything close to it, for getting deeply involved in a civil war in that region. The precedent isn't only Iraq, it is Vietnam. We do not want it.

  153. I am trying to say only this, that America has been too complacent and goes along with senseless stubbornness. People don't care as long as it's what Pres. Obama did. He isn't expected to backtrack even when it's so clear he was wrong on Syria. I'm not saying Pres. Assad did so well. I am saying he has been trying harder to do what's right, while the U.S. policy is totally wrong there. Pres. Obama needs to be impeached if only for announcing for Pres. Assad to "step down". It's all been downhill since he, and some other leaders (in Europe) chimed in too on that stupid ultimatum. Pres. Obama was at least as bad as George Bush was in deciding to make war on Iraq! The U.S., and a complacent America, have been totally without conscience, have been responsible for the near ruination of yet another great nation in the Middle East!

  154. What vacation?

    When the greedy can no longer rely on the excuse of the high price of oil to bloat the cost of food and housing in the U.S., those who have had no vacation in a decade because of frozen wages will do what has to be done to relax. It's the Koch brothers, not Putin, who must worry.

  155. While I'm happy to have the extra money in my pocket, sadly the drop in oil prices postpones our move to renewable energy sources thus holding us hostage to the inevitable oil price spike in the future and the recession that will accompany it.

  156. If government would just get out of the way by helping businesses through tax incentives and all manner of subsidies we might see see faster and more significant improvements in alternative forms of energy.

  157. I'm guessing the GOP and the big boys in Houston will seek to bury that crazy notion in the 2016 campaign to install a new screw-up in the White House.

  158. Oh and the lower price of oils slows down the needed shift to non carbon energy alternatives Ensuring global warming exceeds safe levels And mass extinction occurs.

    Putin and Cuba and ISIS etc are just deck chairs on the titanic

  159. Possibly the Russian people will turn against President Putin if the conic price is severe.

    But, my feeling is that they will be with him for quite some time. The biggest mistake made by the new Ukrainian government after the change in regime was to symbolically remove Russian as an official language in the Ukraine.

    The act gave President Putin the cover to do what he has done in southeastern Ukraine "to protect the Russian people".

    Imagine if a new Canadian government decided to abolish French as an official language in Canada on the basis that "only" a fifth of Canadians used it. There would be immediate and vocal opposition in Quebec and northern New Brunswick. I, for one, might consider any such opposition as "reasonable". Of course, in the Canadian case, France is no longer a threat. In the case of Ukraine, Russia is close by and has the means to support dissent.

    That's why I think the Russian people might be willing to endure considerable hardship in defence of "the Russian people".

  160. From the title, I thought you were going to write about the fact that fewer and fewer Americans enjoy paid vacations and holidays. My brother-in-law, about 40 years old, just got a job that offers paid vacation for the first time in his life, even though he'd been working full-time for years at the same job.

  161. If only the price of heroin would crash and starve out the Taliban.

  162. Only the Gulf States such as UAE, Saudi Arabia, and Qatar can starve out the Talibans, ISIL, Jabth Al-Nusrah or Al-Qaeda.

  163. There is no hint is this column that the writer has tried to understand the perspective of peoples or countries being criticized. The issues with Russia for instance are not mere issues of a particular President who is repeatedly ridiculed and vilified but of the Russian people who the elected President represents.

  164. This is a plot to arrest the development of alternative energy sources, and, "Erdogan being criticized by the European Union for arresting his opponents"; arrest Erdogan!

  165. It's funny how this "lucky streak" coincides with the Obama presidency. I wonder how lucky we would have been if war monger McCain were elected in 2008.

  166. "It's funny how this "lucky streak" coincides with the Obama presidency."

    How did the President orchestrate this lucky streak?

  167. If another nation put missiles near our shores, and were able to sanction our country, increasing our economic hardships, would we be likely to do what that other nation wanted us to do? Or would we harden in resistance, even coming to hate them for their attempts to dominate us? Because really, when treating with others, imagining one's own reactions if we were in their place can be very instructive.

  168. Mr. Friedman is a very astute columnist but, in this article, he goes overboard, and over-simplifies numerous global questions. The result is simply unreasonable assessments and erroneous projections. My advice: focus on one or two global questions per column!

  169. Oil prices do not change by chance, and by now we should also have learned that they definitely do not change because of market forces.

    Oil prices are always manipulated. The power of oil in geopolitical strategy is too large to imagine that the powers that be - the USA, Saudi Arabia, China - would ever let them flow freely with the laws of supply and demand.

    I have been trying to understand the reason behind the recent fall in oil prices. And I have come up with only one plausible answer. Saudi Arabia (and its allies) want to remind America that oil independence is an illusion, by blowing up the business model that sustains the expensive extraction of American oil. Additionally, the Saudis also would love to punish Russia for its support to the regimes of Iran and Syria, Saudi Arabia's worst enemies in the middle East. And they may want to go as far as to cause Putin's fall from power.

    As this theatrical show of power unfolds, America is just a spectator.

  170. This is the market working. Of course, this is what the Saudi's are doing. The US producers have unleashed a torrent of new oil. Demand is soft because the world's biggest economies are weak. The world is over supplied. The Saudi's know well that if they cut back their production, no one else in OPEC will follow and Saudi Arabia alone will sell less, at, maybe, a higher price. Why?

    They plan to sustain their output, which will keep the oil price down, and this will pressure the US producers to dramatically scale back their efforts to find more oil.

    This isn't "manipulation". This is free market economics in its purest form.

  171. "Oil prices are always manipulated."

    In this scenario, who exactly is manipulating oil prices?

  172. The pain in the oil producing economies--Russia in particular, but Iran, Iraq, Saudi Arabia, Libya and others--is more than offset by the benefits of lower oil prices to the industrial economies. Those economies have been held hostage to the cartel for the better part of five decades, and can now enjoy the stimulus from lower oil prices, and some sense that this may be the beginning of the end of the stranglehold.

    More production, more conservation and advances in solar and other sustainable energy have paid off. Prices will go up again, but economic forces have produced a bias downward, short and long term. It might be easy for us to be a little smug, seeing economies that are driven solely by the ownership of scarce natural resources, again fall behind economies driven by creative energy.

    Our economy is far from perfect, but the scarcity (high prices) of energy and our constant attempts at stewardship of our resources, have provided alternative energy sources and a new attitude toward conserving energy that is at the bottom of this basic economic phenomenon. We should thank the cartel for doing what they could to keep energy prices high. and providing the incentive for what appears to be a transformative era.

    Geopolitical fallout? A lot easier to deal with in a strong economy.

  173. Brilliant, intelligent and instructive. As usual.

  174. This thing about "Havana's fears of losing the 100,000 barrels of subsidized oil a day it gets from the now cash-strapped Venezuela" is often repeated but may be a canard.

    I'm not sure I buy it. We need more facts.

    How much was Cuba paying for oil even with the Venezuelan discount? What kind of (financing) terms?

    If Venezuela cuts off subsidized oil to Cuba, how much would Cuba have to pay for oil now that global oil prices have dropped so sharply (on the order of 50-60%)? i.e., is there much difference between today's market prices for oil and the "special deal" that Venezuela previously offered?

    Granted, the financial details of Cuba's oil relationship with Venezuela may not be readily available. But maybe Friedman could consult some analysts before repeating this saw.

  175. I wrote before: "Why is Mr. Friedman continually making deprecations against Vladimir Putin?" It set me thinking what a war crime the terrorists have been waging against Syria, and how that compares with the far-less bad thing Pres. Putin did as to Ukraine. Lest we forget, those terrorists were fully supported by various members of NATO, and the war ended soon except The U.S. policy was to make sure Pres. Assad was overthrown. This again has been done in the face of Russia's interests which are on Syria's side. America is said to have picked no side, and is free to claim it stands back and has,'t picked sides. That's absolutely false. Since August 18, 2011 western leaders asked al-Assad to step down.
    There have been numerous attempts to settle for peace. What isn't said is what counts, and that is how the U.S. acts like its powerless to have stopped the violence, Clearly the terrorists have been the really bad acore. That's why the press keeps repeating its accusations against Syria's government. What isn't said is how the U.S. has refused a peace deal when it could have happened. They refused to allow Iran to attend the talks. The talks were reduced to a farce. No real attempt was made to save the country from the horrible war. Then ISIS gained power there. This has all been because of stupid intransigence.
    [To be continued.]

  176. Continuation of previous comment:
    Having written a comment starting: "I wrote before: "Why is Mr. Friedman continually making deprecations against Vladimir Putin?"
    Then two people made responses, not liking what I wrote.
    This and the comment just preceding this one are mainly a response to the objections.

    I was trying to say only this, that America has been too complacent in going along with senseless stubbornness. People don't care as long as it's what Pres. Obama did. He isn't expected to backtrack even when it's so clear he was wrong on Syria. I'm not saying Pres. Assad did so well. I am saying he has been trying harder to do what's right, while the U.S. policy is totally wrong there. Pres. Obama made an error if only in announcing for Pres. Assad to "step down" )August 18, 2011) It's all been downhill since he, and some other leaders (in Europe), chimed in too on that imperious ultimatum. Pres. Obama was at least as bad as George Bush was in deciding to make war on Iraq! The U.S., and a complacent America, have been totally without conscience, have been responsible for the near ruination of yet another great nation in the Middle East! And for 1) making a clear path for the Islamic State (which Pres. Assad would not have allowed if his nation had not been beset by all the terrorists including the 'good ones' the U.S. has wanted to support. 2) for making more friction with Russia in this matter; 3) for ruining the efforts by the U.N. to end the war.