Posted in: Commentary,
by Gregg Laskoski on Jan 21, 2013 06:17 PM
We may have some ideas on how American consumers view OPEC, but how does OPEC view its #1 customer --the U.S.A?
In its Monthly Oil Market Report issued Wednesday, OPEC leaders' collective view is expressed candidly and their observations may help us learn more about the severity of political problems here than all the opinionating of so-called 'informed' obervers and pundits.
Here's what they say:
For the past weeks, the outcome of negotiations in the U.S. to avoid the ‘fiscal cliff’ – a term that describes the
automatic spending cuts and tax increases set to take place at the beginning of 2013 – has been a major uncertainty hanging over the US economy.
Despite recent data showing an improvement in the country’s economy, the lack of clarity about the outcome of these talks over the past months led to a deceleration in business spending and investments at the end of the year, as well as a decline in consumer confidence. [END}
"Had it been triggered, the fiscal cliff was seen as representing a potential of drag of around 4 percentage points to US GDP. In the previous Monthly Oil Market Report, the forecast growth of 2% for the US in 2013 anticipated a drag of around 1.5 percentage points. The current agreement – which extends tax cuts for all but high income brackets, continues unemployment benefits for an additional 12 months, and postpones spending cuts for another 2 months – is inline with this assumption, so this year’s growth forecast remains unchanged.
If, however, no new solution is found when the postponed spending cuts come due, then an additional hit of around 0.5 pp to GDP will have to be accommodated.
In terms of oil demand, the US is expected to remain flat in 2013 after two consecutive years of declines. US consumption could return to negative territory if the economy were to suffer a setback due to fiscal issues. European consumption is forecast to shrink further in 2013, but at slower rate given the expected improvement in economic growth.
One important aspect, which is the automatic spending cuts, was delayed by two months, and, by the beginning of March at the latest, they should be implemented if no solution is found in the meantime. These spending cuts would have a negative impact on GDP growth of 0.5 pp and would consequently reduce the GDP forecast
accordingly. Moreover, the undergoing discussions on raising the ‘debt ceiling’ should also be awaited.
The US debt ceiling would have been already breached by the end of the previous year, were the Treasury not to have implemented measures that avoided this scenario. These measures have given some more time — according to the Treasury, around two months — for negotiating the raising of the debt ceiling. An additional aspect adjunctive to the fiscal cliff negotiations and the raising of the debt ceiling is the approval of the budget expenditure by 27 March. If no solution to all these issues is found, then the fiscal issues facing the US might again overshadow
the improvements in the underlying economy.
In the meantime, the labour market — despite being a lagging indicator — is improving, but only slowly. The unemployment rate stood again at 7.8% in December. Therefore it should come as no surprise to learn that that consumer confidence has fallen again. The consumer confidence index of the Conference Board fell to 65.1 in December from 71.5 in November."
Apparently if the U.S. sees economic growth in 2013, we'll surprise some of the most-informed business people in the world.