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Featured Advisor



Kim Butler
President

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX



BIOGRAPHY:
I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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The Effect of Low Oil Prices on the World

Unrest in the MIddle East makes OPEC less effective in maintaining high oil prices worldwide.

| BY Kent McDill

While Americans are enjoying some of the lowest gas prices in recent history, oil producing nations in the Middle East and South America are beginning to worry.

In countries where oil revenues pay all of the bills, lower gas prices in the United States means their budget is under attack.

According to data compiled by DoubleLine Capital for Reuters, oil producing countries know exactly the breakeven price of gasoline in America for them to meet their budgetary expectations. For instance, in Iran, its $135 a barrel, well above the $85 per barrel oil was selling for globally on Halloween.

Russia needs its oil to sell at $100 a barrel, while Saudi Arabia survives on $95 per barrel. But neither of those numbers are currently being met.

A decrease in American demand and an increase in North American oil production, as well as the shift to less expensive winter blends, has created the significantly lower price for global oil.

In the past, the Organization of the Petroleum Exporting Countries (OPEC) would demand members reduce production to decrease supply and increase demand. However, the state of politics and regional battles in the Middle East has altered OPEC’s effectiveness.

Venezuela, South American’s largest oil producing country, is quickly considering budget restraints to reflect the loss of oil revenues. Russia, meanwhile, is considering dipping into its oil-produced revenue reserves in order to keep prices afloat.

While the oil producing countries may suffer from a bottom line standpoint, the worldwide economy benefits from lower oil prices. The International Monetary Fund estimates that every 10 percent drop in oil prices is reflected in a notable rise in global gross domestic product.

China, the second largest importer of oil in the world, is also likely to benefit from lower oil prices.

In some areas of the country, the American consumer is seeing gas prices under $3.00 a gallon, which is good news heading into the holiday shopping season. A study of consumer sentiment by Reuters and the University of Michigan show optimism about the American economy is higher than it has been in seven years, and the reduction of gas prices is considered a key influence of that sentiment.

 



About the Author


Kent McDill

kmcdill@spectrem.com

Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.

In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.

McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.

McDill is the father of four children, and an active fan of soccer, Jimmy  Buffett and all things Disney.