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Why the Stock Market Will Recover

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By William Mills

The principle cause of the panic which has gripped the world’s stock markets since the beginning of the year is the false belief that the fall in oil prices is the result of a slowdown in world economic activity.

Oil consumption is increasing even as the renewables of wind and solar are taking a larger share of the energy market with every passing day.

The fall in oil prices is the result of over supply due to the technological advances in fracking in the USA.

The two largest suppliers, Russia and Saudi Arabia, have maintained fairly constant over the last five years at around 10 million barrels a day.

It is the USA’s productivity jumping from around 6m towards 10m which has made all the difference.

Cheap oil is good for the British economy now that it imports more than it produces from the North Sea.

The less paid out in fuel and heating costs to overseas oil barons, the more profit for available for shareholders.

The sole logical reason for stock markets to fall is the Gulf states commitment to domestic expenditure to keep their citizens content in the wake of the Arab Spring.

Having seen their incomes halved due to the fall in oil prices they have had to raid their sovereign wealth funds to make up their cash shortfall.

Yet rich as they are, these shareholdings are finite and once used up the market will stabilize.

Alas stock market peaks and troughs are rarely driven by rational sentiment, however market forces will eventually take over leading to steadily rising prices.

 

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