With low oil prices are we putting high octane fuel into the economy?

The past few months we have been witnessing the steady drop in oil price.  The below chart shows the oil price going from over $105 a barrel to below $50.

What most people forget too, is oil is priced in US dollars. So whilst the oil price has dropped, at the same time part of this sell off has also been driven by the increase in USD.  The below chart shows this recent change with an increase of over 15.5% in currency move alone. 

Now whilst most people are worried about the commodity sector and resource companies not making a profit, we have consequently seen this flow through to a level of recent volatility and jitteriness in the market. What is often overlooked however is how this will impact on households.

We quickly forget that, particularly here in Australia, only around 3% of the population is actually employed by the mining sector.  Although it may contribute a large amount in GDP terms in household numbers, it is very few that actually directly benefit from this sector from an employment perspective.

In my research, I came across this interesting example…. if oil stayed forever at $40 per barrel and never raised above this level, below is a list of the countries which will benefit from this change and the ones which would be impacted.   The interesting thing to note however, there are more countries on the positive side rather than the negative side of this list if oil stayed at these levels or went lower.

Time will tell even if this is even a realistic statement or not but I’ll save that debate for another day!