The Impact Of Lower Gas Prices – BHP And Inflation Suffer
Although crude oil prices have ticked up slightly over the past few days, they have been down substantially for the majority of the year. And, this has begun to take a toll on companies far and wide. Take BHP Billiton for examine. The Australian miner has been hit hard by low commodities. The company has been forced to record the biggest loss ever. Today, the company reported a massive loss of 6.4 billion dollars! Of course, the company isn’t only dealing with gas problems. They’ve also been forced to make amends for a disaster in Brazil that took the lives of several people.
Nonetheless, the company’s EBITDA remained at $12.3 billion. The company was forced to pay up to 1.3 billion to clean up toxic pollution from the Doce River after a dam failure at a Brazilian iron ore owned in cooperation by BHP and Vale. The company’s management still sees a bright future ahead and the company’s stock has surprisingly climb today, despite the bad news. Canada’s economic recovery has also been slowed, due to the decrease in oil prices. And, the slight recovery in the price has failed to provide the country any significant benefit. The country’s currency has also fallen in correlation with the dollar and this has undoubtedly slowed the country’s recovery.
Inflation within the U.S.
Within the United States, low gas prices have caused annual inflation to slow. The prices of various consumer goods have remained stagnant over the past month and this has forced the annual inflation rate to remain the same. Previously, the consumer price index increased over several months, but this was halted by the decrease of oil prices in July. During the month of June, consumer prices rose approximately .2 percent. Analysts initially expected that certain core prices should rise .2 percent again in July. Unfortunately, they were wrong. Due to the low gas prices, the core price index increased only .1 percent. Economists admit an increase in prices is important and will help to stimulate growth, while also increasing worker wages.
Impact to the Federal Reserve
The policymakers of the Federal Reserve expect to see inflate rise by 2% for the year, but this may not happy and it may very well force the group to halt any plans of a rate hike in the near future. In all likelihood, the Federal Reserve will be frozen by weak inflation within the United States. Still, the NY Fed President, Dudley, insists a September rate hike is still a possibility, but that is beginning to look less and less likely at this point. Reality Changers and others admit the chances of a rate increase are slim to none.
While the low oil prices are having a negative impact on the American economy, it appears that other countries are being affected, as well. Venezuela’s oil production, which is known for being the largest in the world, has plunged lower than expected. According to a report from Columbia University, the country is in a dire economic crisis. Part of this downfall could be contributed to a mismanaged state-run oil company. The report has also alleged that there is a shortage of medicine and food.