Looks like the US is going to have to finally start paying its bills. That is going to be a shock to Americans. Easy credit may be a thing of the past as well. I'd really hate to see the financial turmoil of the 70s come back - it was tough enough living through it the first time.
What if gasoline prices start soaring in the US, putting US prices on parity with the rest of the world? Remember the financial collapse of 2008? That didn't happen overnight either - it took a couple of years for everything to unfold and collapse.
The US is the largest producer of oil in the world. If the price of oil went way up a lot of things would happen including the US would start producing more oil as marginal projects would start to make economic sense.
The second thing that would happen is people would start buying more hybrid and electric cars.
I have no idea what will happen to the price of oil. I do think that in general people who say things like "finally the US will start paying its bills!" are often not very sophisticated investors. They don't have finance degrees, work on wall street, or have long history as investors. Not that that precludes them from being right! But they could also just be people with an axe to grind and little to lose.
This really shouldn’t be the top comment. USD is very convenient and desirable to use and no other currency comes close as a replacement reserve currency.
If the agreement was extremely inconvenient the Saudis would surely have found a way around it. Rare is the economic agreement that stands against efficiency.
There’s a meme going around certain circles that the USD is doomed and everyone is going to use….Yuan, Rubles? The Euro? Yen?
It simply isn’t plausible. The USD wins out because it is very useful. I write this as a non-American who transacts business mostly in USD, including with non-American contractors and companies.
The US may or may not have to pay its debts but this pact does not seem very relevant.
Oil demand is set to peak by 2030, mostly due to massive buildouts of renewables (with China taking the lead.) Oil isn’t going away, but anyone taking the “oil prices are going to soar long term” side of the bet is making an incredibly stupid bet that will end in tragedy. (Anyone making the “US oil prices will soar in the short term” bet has to deal with record US shale production.)
The losers here are the middle eastern countries that didn’t sufficiently diversify.
Then all of the fracking fields that are already permitted would be fired back up and there would be low-skill/no-skill workers making 6-figure salaries again in the fields in the Dakota's.
Gasoline prices, the price of oil itself is not the biggest issue here.
What is important is that any reduction on the global demand for dollars and USD denominated treasury bonds can have a chilling effect on the ability of the US to maintain its gigantic trade deficits year over year as well as re-financing government debt.
What if gasoline prices start soaring in the US, putting US prices on parity with the rest of the world? Remember the financial collapse of 2008? That didn't happen overnight either - it took a couple of years for everything to unfold and collapse.