Oil Prices, Stock Market Falls

Posted by Viktoria Michaelis on January 8, 2016 in News & Opinion |

Panic in the City? As with many recent years, the stock market, especially in the USA, has suffered a fall in values. This year it has been considerably more than in previous starts, and many people are worried. Billionaires – and those with lesser means – have lost millions in trading. At the same time oil prices have hit lows unseen in over a decade. What, though, does all this mean?

To be honest, for most of us it means nothing at all or, at least, nothing bad. Most of us do not own high-value stocks and shares and do not assess our wealth according to the FTSE index, the DAX or any other share trading system. We work, and live, from day-to-day according to what we have earned through our labors and what we have left in the bank after paying all the bills.

Billionaires and others have lost millions in the stock market plunge? Yes, quite possibly. However, what they have lost is a paper worth, it is not real money. They have only lost where the value of the stocks and shares they own has dropped below the price they paid, adjusted for inflation, and then only when they try to cash their assets in.

The price drop in oil is another matter entirely. For those trading in oil the drop is definitely a hard smack in the face. They’re not going to make the massive profits pushing the trading, and effectively the end-user price, up which they have enjoyed in previous years. For businesses, though, those who need oil and oil products to operate, who are faced with high bills to enable their work, the price drop can only be seen as a boost to the economy. In theory, through the savings they realize, prices for common goods should drop. Transportation costs are less, as are heating and energy costs. Whether these actual savings will be passed on to the consumer is another matter entirely.

And, finally, for the average household the drop in oil prices is also a bonus: transportation should be cheaper, when the savings are passed on at the gas tank; energy should cost less for heating and lighting, when the savings are passed on by utility companies.

For many it is not a step back or a plunge into economic woe and darkness, but a leveling out after years, if not decades, of constant price rises which have cut the available cash for families and smaller businesses. Those holding stocks and shares can take a moment to reflect, and consider whether their investments have been good while, at the same time, knowing that they have not lost, that their lifestyles will not be greatly changed by the plunge in values. Dividends may well be less this coming year, when they are based on share prices, but might also be higher as more companies, saving through oil costs, should be capable of turning a better profit. For some the drop in prices and values can only be seen as a chance to win, providing that those who control the paper money, the values on the stock market, don’t force another hike and try to keep their money safe at our cost.

  • Viktoria Michaelis.

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