Opinion Columns & Blogs

Millard Grimes: More economic gain than loss

The opening weeks of 2016 were an unsettling time for the largest investors in U.S. stocks. But it could be a hopeful start for U.S. consumers.

The Dow Jones stock, which rose 10,000 points from about 8,000 points in 2008 to about 18,000 in 2015, dropped nearly 800 points by Jan. 20, to about 15,000, nearly 5 percent, but still leaving investors with a huge gain since Barack Obama became president.

Much of the decline was blamed on the even larger drop in the price of oil, from nearly $50 a barrel at one time to $27 a barrel in mid-January 2015. That may have been bad news for oil speculators who have enjoyed the best of their very lavish years, but it is great news for consumers everywhere. The decline in oil prices brought gasoline prices down from nearly $4 a gallon to $1.50 in many states, and is still dropping.

The price of oil also affects nearly every consumer item, including items made of plastic, an oil product, and just about every package or container is plastic. It also reduces the cost of delivery by trucks or planes, not to mention cars. The reduction in the cost of living to Americans is incalculable. And, then, of course, there is the cost to airlines, whose oil consumption per flight is so high.

The end result should be more Americans flying, spending money at motels, restaurants, tourist attractions and on items in convenience stores where so much gasoline is sold. Undoubtedly a lot of customers put the extra dollars into the lottery tickets in January when the pay-out became so large, which wasn't their best investment but drove up lottery income by millions for schools in Georgia and whatever other states use their lottery money for.

The consumers of the U.S. -- and other nations -- have been the losers in recent years, as their income has stagnated while the stock market and incomes of the shareholders and companies have soared. The 300 percent rise in stocks since 2008 also meant a 300 percent rise in the value of those companies, while the median wage for all Americans has remained stuck at about $40,000 a year -- and that's the median, which means half of Americans were making less, much less in many cases.

But there are other benefits. On Jan. 18, to little notice by the news media, ISIL announced it was cutting payments in half to its terrorists and adherents throughout the world due to a sharp decline in revenue. The U.S. has known that much of ISIL's income came from the seizure of oil resources in Syria and Iraq and the sale of oil at bargain prices to nations most in need of oil. The loss of oil-rich areas in Iraq, along with the U.S. deal with Iran last week, severely reduces oil available to ISIS and also increases oil deliveries to European nations, which have no oil of their own, and whose economies suffered even more than the U.S. from high oil prices. The European nations could enjoy a real economic boom, which will assure growth and even the Euro's existence.

The largest source of oil in the world is still Saudi Arabia, one of the most recalcitrant Arab nations, but the increased oil supply saps Saudi Arabia's power to set the world price of oil. Saudi remains the second largest importer of oil to the United States and to Canada, but the lifting of the sanctions last week will allow the U.S. to again import oil from Iran for the first time in nearly 40 years, a major reason Arabia has so opposed the negotiations with Iran.

Then, of course, there is the pressure lower oil prices put on Russia, the third largest oil producer in the world, which is dependent on oil for keeping its economy in balance and is now pressed even more by the sanctions imposed by the Europe and the U.S. because of Russian policies in Ukraine. Certainly the U.S. has more leverage in dealing with Russia now, and cold possibly bargain to lift the sanctions as it has in Iran in exchange for other concessions.

Aside from the effect on the U.S. cost of living, the damage to ISIL's income appears to be the most important benefit. But the decline in the stock market and other consequences will apply some pressure for raising oil prices and they should be resisted. Oil companies are still making record profits. They were very wealthy when oil was $20 a barrel and they certainly get along at $25 a barrel -- or even lower. There aren't any poor oil owners -- or nations.

This is a pivotal point in the recent world economy, and it needed one.

Millard Grimes, editor of the Columbus Enquirer from 1961-69 and founder of the Phenix Citizen. is author of "The Last Linotype: The Story of Georgia and Its Newspapers Since World War II." A profile of Grimes can be found in the Georgia Encyclopedia, www.georgiaencyclopedia.org.

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