HONOLULU (HawaiiNewsNow) - The global economy has been buffeted lately - even Warren Buffett has been buffeted - by slowing growth in China, rising oil production, and a stronger dollar. But how does all this tie together?
The easiest way to understand this is to start with the oil. Oil prices are way higher than they were 20 years ago because China and third world economies are using more. But in the past year the trend has slipped back the other way. Oil cost doubled in 2014 what it costs now, and indeed benchmark crude is down 12% just since this month began.
Why is oil cheaper? Those fracking Bakken guys are pumping more. Iran has been undercutting OPEC on the black market. China's slowing growth means its oil needs aren't rising as fast as expected. And when things are uncertain, people move wealth into the safety of the U.S. dollar, making the dollar worth more.
Oil is traded in dollars, and with the dollar worth more, producers can charge less and still make the same profit in rials. So it's a feedback loop.
But who's complaining? And that's Crisis at a Glance!!!