Interest rates will likely stay low, risk of deflation and stagnation is high.
The Middle East is likely to become even more unstable. There will be more regime and border changes in the Middle East than seen before the Second world war.
The US, China, India and Germany will benefit the most from falling oil prices. Russia, Iran and Venezuela are likely to be the countries which have the most to lose.
The fact that the USA and not Saudi Arabia has become the World's Swing Oil Producer is driving crude prices down.
Some U.S. shale producers may break even at $40 a barrel or less. So it would hardly be a surprise to see Oil dip below $40 a barrel before Saudi's cut production. (I am not predicting crude prices going to $40, but laying out a bottom price where the production cuts may be seen).
We are likely in a secular bearish trend for Oil. Oil producers and the related industries will likely underperform for the foreseeable future when compared to most of the sectors.
We can draw multiple inferences from the falling energy prices:
Interest rates will likely stay low, the risk of deflation and stagnation is high. America is at a great advantage for the next decade. It has the Oil for now and it has the Capital to spend on infrastructure and research. It will be ready with new technology, to decrease its dependence on oil when production decreases next time around.
