‘Free trade’ in trouble in the United States


  The United States
  Current Bilateral/Multilateral FTA’s
  Proposed/Suspended Bilateral/Multilateral FTA’s

As free trade reaches a crossroads in the US, developing countries have to rethink their own trade realities for their own development interests.

“FREE trade” seems to be in deep trouble in the United States, with serious implications for the rest of the world.

Opposition to free trade or trade agreements emerged as a big theme among the leading American presidential candidates.

Donald Trump attacked cheap imports especially from China and threatened to raise tariffs. Hillary Clinton criticised the Trans-Pacific Partnership Agreement (TPPA) which she once championed, and Bernie Sanders’ opposition to free trade agreements (FTAs) helped him win in many states before the New York primary.

That trade became such a hot topic in the campaigns reflects a strong anti-free trade sentiment on the ground.

Almost six million jobs were lost in the US manufacturing sector from 1999 to 2011.

Wages have remained stagnant while the incomes of the top one per cent of Americans have shot up.

Rightly or wrongly, many Americans blame these problems on US trade policy and FTAs.

The downside of trade agreements have been highlighted by economists like Joseph Stiglitz and by unions and NGOs. But the benefits of “free trade” have been touted by almost all mainstream economists and journalists.

Recently, however, the establishment media have published many articles on the collapse of popular support for free trade in the US:

> Lawrence Summers, former Treasury secretary, noted that “a revolt against global integration is under way in the West”. The main reason is a sense “that it is a project carried out by elites for elites with little consideration for the interests of ordinary people”.

> The Economist, with a cover sub-titled “America turns against free trade”, lamented how mainstream politicians are pouring fuel on the anti-free trade fire. While maintaining that free trade still deserves full support, it cites studies showing that the losses from free trade are more concentrated and longer-lasting than had been assumed.

> Financial Times columnist Phillip Steven’s article “US politics is closing the door on free trade” quotes Washington observers saying that there is no chance of the next president or Congress, of whatever colour, backing the TPPA. The backlash against free trade is deep as the middle classes have seen scant evidence of the gains once promised for past trade deals.

> In a blog on the Wall Street Journal, Greg Ip’s article The Case for Free Trade is Weaker Than You Think concludes that if workers lose their jobs to imports and central banks can’t bolster domestic spending enough to re-employ them, a country may be worse off and keeping imports out can make it better off.

Orthodox economists argue that free trade is beneficial because consumers enjoy cheaper goods. They recognise that companies that can’t compete with imports close and workers get retrenched. But they assume that there will be new businesses generated by exports and the retrenched workers will shift there, so that overall there will be higher productivity and no net job loss.

However, new research, some of which is cited by the articles above, shows that this positive adjustment can take longer than anticipated or may not take place at all.

Thus, trade liberalisation can cause net losses under certain conditions. The gains from having cheaper goods and more exports could be more than offset by loss of local businesses, job retrenchments and stagnant wages.

There are serious implications of this shift against free trade in the US.

The TPPA may be threatened as Congress approval is required and this is now less likely to happen during Obama’s term.

Under a new president and Congress, it is not clear there will be enough support.

If the US does not ratify the TPPA, the whole deal may be off as the other countries do not see the point of joining without the US.

US scepticism on the benefits of free trade has also now affected the multilateral arena. At the World Trade Organisation, the US is now refusing attempts to complete the Doha Round.

More US protectionism is now likely. Trump has threatened to slap high tariffs on Chinese goods. Even if this crude method is not used, the US can increasingly use less direct methods such as anti-dumping actions. Affected countries will then retaliate, resulting in a spiral.

This turn of events is ironic.

For decades, the West has put high pressure on developing countries, even the poorest among them, to liberalise their trade.

A few countries, mainly Asian, staged their liberalisation carefully and benefited from industrialised exports which could pay for their increased imports.

However, countries with a weak capacity, especially in Africa, saw the collapse of their industries and farms as cheap imports replaced local products.

Many development-oriented economists and groups were right to caution poorer countries against sudden import liberalisation and pointed to the fallacy of the theory that free trade is always good, but the damage was already done.

Ironically, it is now the US establishment that is facing people’s opposition to the free trade logic.

It should be noted that the developed countries have not really practised free trade. Their high-cost agriculture sector is kept afloat by extremely high subsidies, which enable them to keep out imports and, worse, to sell their subsidised farm products to the rest of the world at artificially low prices.

Eliminating these subsidies or reducing them sharply was the top priority at the WTO’s Doha Agenda. But this is being jettisoned by the insistence of developed countries that the Doha Round is dead.

In the bilateral and plurilateral FTAs like the TPPA, the US and Europe have also kept the agriculture subsidy issue off the table.

Thus, the developed countries succeeded in maintaining trade rules that allow them to continue their protectionist practices.

Finally, if the US itself is having growing doubts about the benefits of “free trade”, less powerful countries should have a more realistic assessment of trade liberalisation.

As free trade and trade policy reaches a crossroads in the US and the rest of the West, developing countries have to rethink their own trade realities and make their own trade policies for their own development interests.

By Martin Khor

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.

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Locking horns over human rights


Human rights matter: Demonstrators protesting the shooting death of 16-year-old Pierre Loury confront police after shutting down the Eisenhower Expressway during a march in Chicago, Illinois recently. — Getty Images/ AFP

 

Video:

http://english.cntv.cn/2016/04/17/VIDE0l4zwWjzir4IqZ8mEs9m160417.shtml

It’s April and time for the usual tit-for-tat exchange between China and the United States over their human rights practices.

 

APRIL is the month when the two biggest economies in the world – the United States and China – lock horns in an annual exchange over each other’s human rights practices.

Since 1977, the United States has been releasing its Country Reports on Human Rights Practices, giving its review of human rights issues in countries around the world (but not its own).

And in a retaliatory fashion, Beijing would follow up the next day with its Human Rights Record of the United States in response to the criticisms piled on China.

The Chinese tradition began in 1998 and functioned like a “mirror” for the United States to examine its own human rights flaws. In the words of this year’s document: “Since the US government refused to hold up a mirror to look at itself, it has to be done with other people’s help.”

This year’s collision happened last week.

In the US 2015 report, Washington criticised China’s repression of people involved in civil and political rights advocacy and China’s crackdown on the legal community.

It also highlighted the disappearance of five men in Hong Kong’s publishing industry, believing that Chinese security officials were responsible.

Among others, the report also drew attention to the repression of the minority Uighurs and Tibetans, and tight control on the Internet and media.

As expected, the comments did not go down well with Beijing.

Chinese Foreign Ministry spokesperson Lu Kang accused the United States of politicising the human rights issues in China to undermine the country’s stability and development.

“It’s nothing new for the United States to find fault with the internal affairs of other countries in the name of human rights,” he said.

China’s report, on the other hand, curtly labelled the US human rights record as “terrible”, “no improvement”, and plagued with “numerous new problems”.

Citing statistics, surveys and news reports, it zeroed in on the gun violence and excessive police violence, corrupt prison system and the prevailing money and clan politics in the United States.

Racial relations are “at their worst in nearly two decades,” it added.

And, most notably, Beijing reprimanded the United States for violating human rights outside its borders. Examples cited were the deadly Iraqi and Syrian air strikes, drone attacks in Pakistan and Yemen, and bombing of a hospital in Afghanistan.

The United States is “treating citizens from other countries like dirt,” the report said.

One of the sections in China’s report was reserved for the economic and social rights of US citizens, which Beijing said did not record substantial progress.

A gloomy picture of the United States was painted: “Workers carried out mass strikes to claim their rights at work. Food-insecure and homeless populations remained huge. Many US people suffered from poor health.”

When the Chinese Foreign Ministry’s Lu rejected the US report last week, he pointed out that China’s efforts in promoting human rights have resulted in “great achievements that have attracted worldwide attention”.

While he did not elaborate on the great achievements, China has always been championing eradication of poverty as “one of the greatest human rights successes a country could hope for,” as state news agency Xinhua put it early last month.

In an article to dispute the West’s attack on China’s human rights record at the United Nations, Xinhua pointed out that lifting people out of poverty is an area of human rights that is often overlooked by Western countries, in particular the United States.

“China’s achievements in alleviating immense poverty along with its other human rights feats are victim to the West’s selective amnesia,” it stated.

China has a “moderately prosperous society” goal to lift all of its poor out of poverty by 2020. Among the efforts by the Government, according to Xinhua, are increasing the budget to relief poverty by 43%, improving infrastructure in regions with minorities, and reforming the healthcare system.

By rolling out these facts and figures, Xinhua hoped it could change the West’s “tired and dated view” of human rights in China, but added that it won’t hold its breath.

Till next April, then.

By Tho Xin Yi Check-In-China, The Star

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Source: Global Times | 2016-4-21 0:38:01

 

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Release of fraud suspects disgraces Taiwan


Video:

 Parties, media call for justice for telecom fraud victims

  • Parties, media call for justice for telecom fraud victims. Political parties and media outlets from Chinese Mainland and Taiwan have denounced a telecom fraud case, and said the suspects must be brought to justice. This is after Taiwan police on Saturday released 20 suspects who were deported from Malaysia….

Malaysia repatriated a group of telecom fraud suspects Friday, including 20 Taiwanese. Taiwan authorities maneuvered to have them sent to Taiwan.

To the surprise of the outsiders, these Taiwanese suspects were released in a few hours after arrival at Taoyuan International Airport.

When Kenya last week sent a batch of telecom fraud suspects to the Chinese mainland, also including Taiwanese, it triggered a public outcry in Taiwan. Pro-independence media and leading figures, including Tsai Ing-wen, protested against the mainland for “illegal abduction.” Now Taiwan is showing that it is more lenient to fraud suspects than anywhere in the world.

Taiwan’s judicial authorities expressed that the crime was committed in Malaysia and victims were mainlanders. Since they do not hold evidence against these suspects, they have to release them first.

However last week, the same department stated that it was in accordance with international law that Kenya repatriated Taiwan suspects to the mainland, and “only the mainland can hold them in control.”  Pro-independence forces would not admit the change was a result of pressure they exerted.

To the outside world, protests against the mainland and releasing suspects show the ugly side of Taiwan politics when it is taken hostage by radical public opinion.

The Democratic Progressive Party (DPP) is manipulating and coping with populism.

The release of the 20 suspects has disgraced the Taiwanese media and Taiwan’s rule of law.

The mainland is clear how the DPP is manipulating public opinion to instigate “anti-China” sentiments. Swayed by such sentiments, Taiwan politics prioritizes stance over facts.

Western democratic politics can easily provide a hotbed for radicalism and extremism. Taiwan and Hong Kong both have demonstrated this tendency.

A judiciary case, which should be fact-oriented, is turned into a political event across the Straits. The suspects even applauded Taiwan for its “human rights” after being released. Should the mainland feel indignant or treat it with disdain?

The key is that the mainland should stick more firmly to its principles, and resolutely resist the rascally demands by Taiwan’s twisted politics.

Taiwan’s poor performance in handling the suspects is also teaching a lesson to other countries. Malaysia is proved wrong in repatriating the fraud suspects back to Taiwan. Kuala Lumpur should learn from the case and not be tricked by Taiwan in the future.

Taiwan, which is an inseparable part of China, is always eager to prove it is a “country.” Taiwan’s ingrained sense of inferiority and paranoia have permeated into its politics, resulting in its self-righteous performances, of which Taiwan’s public should be aware.

– Global Times

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If it’s too good to be true, something’s wrong



DURING a recent shopping session with my family, I saw an interesting promotion for a television set at a big retail store.

The retail price for the said television set was RM4,999. A 22% discount was offered for cash purchasers which brought the price down to RM3,899.

While the price seemed attractive enough, I saw another sweetener for the deal, stating that the special price under its flexible payment plan was RM2,729.30, apparently a massive 45% discount from the retail price!

At first glance, the flexible payment plan was the best deal. As the deal seemed too good to be true, I decided to do some calculation to see the rationale behind it.

Under the flexible payment plan, the weekly installment was RM26.72 for a total of 5 years.

The price of the television set would end up to be RM6,947 instead of RM2,729 upon the last payment.

I was surprised with the huge difference between a cash purchase and the flexible payment plan. This incident has also highlighted some blind spots we have in our spending.

Many a time, there are instalment plans that offer seemingly low interest rates as their marketing strategy.

As consumers, we may end up spending more than we thought if the effective interest rate and other financial concerns are not taken into account.

Taking the television set as an example, the total amount paid for the instalment plan is 78% higher than the cash purchase.

The effective interest rate per year for the financing of 5 years is about 45%, which is way higher than our fixed deposit rate of only 4%.

Bear in mind the high amount that we pay is for a depreciating item. With more advanced technology introduced year after year, the television set we buy today would not have much value left.

Thus, what looks like an attractive deal initially does not ring true anymore after factoring in high effective interest rates and accelerated depreciation in values.

Looking at the high premium charged for the instalment plan, it would be better to go for a cash purchase if the situation permits.

Often, it is better to evaluate our needs before making the decision to purchase depreciating items.

I always encourage prudent spending especially in testing times when we are faced with uncertainty in the economic environment.

Imagine if we can channel the money spent on depreciating items to assets such as investments or properties for the same period of 5 years.

Our money would have grown and helped to improve our financial position, or at least to hedge against inflation.

Other than potential value appreciation, the interest we pay for a housing loan is lower compared to other loans such as personal, credit card and car loans.

The effective rate for a housing loan is as advertised, and the rate is calculated based on the reducing balance (only pay interest on the remaining loan balance).

On the other hand, for car loans and flexible payment plans like the one mentioned above, their interest rates are calculated based on the full loan amount throughout the term, which makes the actual interest rate higher than the advertised rate.

For instance, the interest rate for credit cards is calculated based on 1.5% per month, hence the effective rate per year is 18% (1.5% times 12 months).

On the other hand, for a RM100,000 car loan with a 2.5% interest rate and a 7-year loan tenure, the interest amount would be RM17,500, making the total amount for the car RM117,500.

As a result, the effective interest rate for this car loan is 4.7% instead of 2.5%.

On many occasions, we tend to be drawn in by the “attractiveness” of easy payment plans without weighing the hidden financial commitments.

Though it helps us to obtain an item immediately, we may overlook the true value of the item and the potential financial burden it brings.

Therefore, if a deal is too good to be true, most of the time, it is just too good to be true and worth a second thought.

By Alan Tong food for thought

Datuk Alan Tong was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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Malaysia’s pragmatic patriot: friends with benefits


 

The South China Sea dispute. The global terrorism threat. Malaysia’s foreign policy is back in the world’s spotlight and it is exciting times for ISIS Malaysia’s Foreign Policy and Security Studies chief.

IN an article titled “Think tanks aren’t going extinct. But they have to evolve”, American scholar James Jay Carafano wrote that the capacity to do rigorous, credible research is “no longer sufficient” for think tanks to manoeuvre their ideas prominently into the policy debate. Instead, think tanks must learn to communicate “in ways that will allow their ideas to break through to decision-makers who are bombarded with information from all sides”.

In that regard, Elina Noor has proven to be a real asset to Malaysia’s premier think tank, the Institute of Strategic and Interna­tional Studies, or ISIS Malaysia. Her ability to articulate on complex and dynamic global affairs – such as major power relations, cyber warfare, terrorism and conflicts – in succinct yet jargon-free language has also made her a highly sought-after interviewee by the international media.

As a child, Elina wanted to be “everything”, from prime minister to fashion designer. Her parents, who ran a management consultancy firm, however, might have subconsciously put her on her career path by leaving the world news on television all the time when she was growing up.

“My parents would engage in lively debates about international affairs between themselves. As I grew older, I wanted to do law with an eye towards international law, specifically how war and conflict affect people.”

After graduating from Oxford University in the United Kingdom, she specialised in public international law at the London School of Economics and Political Science. This was followed by an internship at the Centre for Non-proliferation Studies at the Monterey Institute of International Studies in Washington DC, specialising in issues of weapons of mass destruction terrorism.

Essentially, she helped compile a database of terrorist groups with chemical or bioweapons capabilities by combing through secondary sources and obtaining intelligence from experts who had gone into the field.

Her days in the United States were cut short, however, by visa limitations. So, after nine months, she returned to Malaysia in 2001.

Her appetite whetted by her Washington experience, Elina joined ISIS Malaysia as a researcher.

Though formally positioned as a research organisation for nation-building initiatives, ISIS Malaysia was set up by former prime minister Tun Dr Mahathir Mohamad in 1983 to serve as a crucial sounding board for the government on foreign policy and security issues.

In addition to research, ISIS Malaysia engages actively in non-governmental meetings between states, known as Track Two diplomacy, and fosters closer regional integration and international cooperation through forums such as the Asia-Pacific Roundtable.

Now, having risen through the ranks, Elina heads a team of eight in the Foreign Policy and Security Studies division.

As a claimant state in the ongoing South China Sea dispute, chair of the Association of South-East Asian Nations in 2015, and currently a non-permanent member of the United Nations Security Council, Malaysia’s foreign policy direction has drawn renewed interest at home and abroad.

Invariably, Elina is asked questions on Malaysia’s relations with China. Her answer is perhaps best laid out in an article she wrote, titled “Friends with Benefits: Why Malaysia can and will maintain good ties with both the United States and China.”

On the topic, Elina had explained: “Malaysia should or will be subservient to an awakening dragon, but the cost-benefit calculus militates against provoking it. Equally, Malaysia’s location and posture make it a strategic partner for China in South-East Asia.

“It is the mark of a mature and solid friendship when overall relations are not held hostage to single-issue disagreements.”

Elina had added that such overlapping claims in the South China Sea, “should not, if managed well, stultify cooperation between Malaysia and China in other areas of the relationship. For a developing country with high-income and knowledge-economy ambitions like Malaysia, the show must go on”.

Or to put it simply, Malaysia wants to be everybody’s friend. That’s always been the country’s foreign policy from the start, she points out.

On the other hand, this pragmatic approach has also enabled the country to punch above its weight in places where even superpowers fear to tread.

Elina’s other portfolio, cyber warfare and security, is expected to come further into the spotlight with recent headlines claiming that the so-called Islamic State extremist group in Iraq and Syria intended to abduct top Malaysian leaders, including the PM.

“Malaysia up to this point has handled terrorism very well,” Elina says.

Many attempts have been foiled in the past, she adds, and the police have kept it low-key.

“If you follow the issues closely, you’ll notice the police only started publicising their efforts in the run-up to Pota (The Prevention of Terrorism Act 2015), an anti-terrorism law passed by the Malaysian government on April 7, 2015 enabling the Malaysian authorities to detain terror suspects without trial for a period of two years.”

Part of this publicising had to do with the political selling of Pota, but there was a more legitimate, pressing reason: People were taking security for granted in Malaysia.

“Malaysians treat security like it’s not a problem. We often criticise the police but the military and Special Branch in charge of counterterrorism really know what they’re doing. The police have been very vigilant and I think they do good work but haven’t been given enough credit.”

After 14 years, she still enjoys her job because of the intellectual robustness but admits some world-weariness has set in.

Nevertheless, Elina remains motivated by the knowledge that a lot of good Malaysians on both sides of the political divide are doing good work for the country.

Pointing to a faded wristband she has been wearing for “donkey’s years”, the inscription reads: “Malaysia tanahairku (Malaysia, my homeland)”.

“Call me cheesy,” she says, “but I’ve never thought of removing it. Love for country might, but does not always, equate to love for government. I’m a sentimental patriot.”

By Alexandra Wong, China Daily/Asia News Network

1MDB business model relied on debt to form capital is not sustainable


PETALING JAYA: 1MDB was unsustainable from the start, relying heavily on financial assistance to stay afloat.

The PAC observed that 1MDB’s capital financing structure and financial performance were both unsatisfactory.

“1MDB relied on debt (bank loans, bonds and sukuk) to form its capital, a chunk of which had been sanctioned or supported by the Government.

“Initially, the debt stood at RM5bil in 2009, and went up to RM42bil, compared to its assets of RM51bil in the financial year ending March 31, 2014, and it spent RM2.4bil to pay off interests.

“In January 2016, its debt was RM50bil, compared to its assets of RM53bil, where 1MDB spent RM3.3bil to pay off interests between April 1, 2013, and March 31, 2015,” said the report.

The PAC report also stated that 1MDB had paid RM3.3bil in interests on the loans it took from April 1, 2014, to March 31, 2015, which 1MDB said had yet to be audited.

“It is obvious that the debt amount and repayment of interest are too high compared to the company’s cash flow,” said the committee.

1MDB had also heavily relied on the refinancing exercise to settle matured debts and take new loans, which were used to settle interests on previous loans, among others.

The PAC report also found that 1MDB began facing an imbalance in cash flow in November 2014, five years after it started operations.

“The management and board of directors relied on the Initial Public Offerings (IPO) of Edra Energy Berhad to generate funds, but the IPO could not be carried out,” said PAC.

In the same month that year, 1MDB announced its first loss of RM665mil, resulting in its inability to pay off its almost matu­ring debts which stood at RM2bil, through its refinancing exercise.

“The company’s business model is overly dependent on loans and this caused a burden on the company as it did not have enough income to sustain operational costs and pay off its loans,” read the report.

The PAC also said that as a state investment arm, 1MDB should have focused on best practices, and raised examples of weaknesses in its administration.

“For instance, the board of directors was too dependent and often accepted explanations by the management without delving into the details.

“Indeed 1MDB’s experience is a lesson to all government-linked corporations on the importance of effective administration and integrity,” said the committee. – The Star/ANN

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Oil Prices: What’s Behind the Drop? Simple Economics


    Some think it will be years before oil returns to $90 or $100 a barrel, a price that was pretty much the norm over the last decade. Credit Michael Stravato for The New York Times

The oil industry, with its history of booms and busts, is in its deepest downturn since the 1990s, if not earlier.

Earnings are down for companies that made record profits in recent years, leading them to decommission more than two-thirds of their rigs and sharply cut investment in exploration and production. Scores of companies have gone bankrupt and an estimated  250,000 oil workers have lost their jobs.

The cause is the plunging price of a barrel of oil, which has fallen more than 70 percent since June 2014.

Prices recovered a few times over the last year, but the cost of a barrel of oil has already sunk this year to levels not seen since 2003 as an oil glut has taken hold.

Also contributing to the glut was Iran’s return to the international oil market after sanctions were lifted against the country under an international agreement with major world powers to restrict its nuclear work that took effect in January.

Executives think it will be years before oil returns to $90 or $100 a barrel, a price that was pretty much the norm over the last decade.

What is the current price of oil?

Brent crude, the main international benchmark, was trading at around  $38 a barrel on Wednesday.

The American benchmark was at around $37 a barrel.

Why has the price of oil been dropping? Why now? 

This a complicated question, but it boils down to the simple economics of supply and demand.

United States domestic production has nearly doubled over the last several years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once was sold in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices. Canadian and Iraqi oil production and exports are rising year after year. Even the Russians, with all their economic problems, manage to keep pumping.

There are signs, however, that production is falling because of the drop in exploration investments. RBC Capital Markets has calculated projects capable of producing more than a half million barrels a day of oil were cancelled, delayed or shelved by OPEC countries alone last year, and this year promises more of the same.

But the drop in production is not happening fast enough, especially with output from deep waters off the Gulf of Mexico and Canada continuing to build as new projects come online.

On the demand side, the economies of Europe and developing countries are weak and vehicles are becoming more energy-efficient. So demand for fuel is lagging a bit.

Who benefits from the price drop?

Any motorist can tell you that gasoline prices have dropped. Diesel, heating oil and natural gas prices have also fallen sharply.ny motorist can tell you that gasoline prices have dropped. Diesel, heating oil and natural gas prices have also fallen sharply.

The latest drop in energy prices —  regular gas nationally now averages just above $2 a gallon, roughly down about 40 cents from the same time a year ago — is also disproportionately helping lower-income groups, because fuel costs eat up a larger share of their more limited earnings.

Households that use heating oil to warm their homes are also seeing savings.

Who loses?

For starters, oil-producing countries and states. Venezuela, Nigeria, Ecuador, Brazil and Russia are just a few petrostates that are suffering economic and perhaps even political turbulence.

The impact of Western sanctions caused Iranian production to drop by about one million barrels a day in recent years and blocked Iran from importing the latest Western oil field technology and equipment. With sanctions now being lifted, the Iranian oil industry is expected to open the taps on production soon.

In the United States, there are now virtually no wells that are profitable to drill.

Chevron, Royal Dutch Shell and BP have all announced cuts to their payrolls to save cash, and they are in far better shape than many smaller independent oil and gas producers.

States like Alaska, North Dakota, Texas, Oklahoma and Louisiana are  facing economic challenges.

There has also been an uptick in traffic deaths as low gas prices have translated to increased road travel. And many young Saudis have seen cushy jobs vanish.

What happened to OPEC?

Iran, Venezuela, Ecuador and Algeria have all pressed OPEC, a cartel of oil producers, to cut production to firm up prices. At the same time, Iraq is actually pumping more, and Iran is expected to become a major exporter again.

Major producing countries will meet on April 17 in Qatar, and some analysts think a cut may be possible, especially if oil prices approach $30 a barrel again.

King Salman, who assumed power in Saudi Arabia in January 2015, may find it difficult to persuade other OPEC members to keep steady against the financial strains, even if Iran continues to increase production. The International Monetary Fund estimates that the revenues of Saudi Arabia and its Persian Gulf allies will slip by $300 billion
this year.

Is there a conspiracy to bring the price of oil down?

There are a number of conspiracy theories floating around. Even some oil executives are quietly noting that the Saudis want to hurt Russia and Iran, and so does the United States — motivation enough for the two oil-producing nations to force down prices. Dropping oil prices in the 1980s did help bring down the Soviet Union, after all.

But there is no evidence to support the conspiracy theories, and Saudi Arabia and the United States rarely coordinate smoothly. And the Obama administration is hardly in a position to coordinate the drilling of hundreds of oil companies seeking profits and answering to their shareholders.

When are oil prices likely to recover? 

Not anytime soon. Oil production is not declining fast enough in the United States and other countries, though that could begin to change this year. But there are signs that supply and demand — and price — could recover some balance by the end of 2016.Oil markets have bounced back more than 40 percent since hitting a low of $26.21 a barrel in New York in early February.Some
analysts, however, question how long the recovery can be sustained because the global oil market remains substantially oversupplied. In the United States, domestic stockpiles are at their highest level in more than 80 years, and are still growing.But over the long term, demand for fuels is recovering in some countries, and that could help crude prices recover in the next year or two. – The New York Times

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