Crude oil's collapse continued this week, with prices nearing $75 per barrel, the lowest level in over three years. Prices are dropping as US domestic oil production continues to expand and slowing global economies are reducing demand for petroleum.
While most US consumers focus on oil's impact on gasoline prices, oil's price can have a drastic impact on global politics as well. Many nations, including Venezuela, Russia and Iran, are heavily dependent on oil exports to support their government budgets, making lower prices threatening not only to their economies, but also their governments' stability.
Historically, when oil has declined sharply, the Organization of the Petroleum Exporting Countries (OPEC) has attempted to shore up prices by reducing their production, which accounts for about a third of the global supply. Thus far, there has been little sign of action by OPEC, as its member states scramble to lower prices to stay competitive on the global market. However, an OPEC meeting Thursday in Vienna hinted that OPEC may cut production if prices decline to $70 per barrel.
Cotton Sags under Harvest Pressure
US cotton farmers are over halfway done harvesting this year's crop, but they're facing extremely low prices for their haul. Cotton prices fell to 62 cents per pound this week, near the lowest price is over five years.
For US consumers and clothing retailers, lower cotton costs could lead to cheaper clothes prices or allow for more cotton-rich blends, which went out of fashion when cotton prices topped $2.00 per pound in 2011.
Prices are falling in part because US cotton production is expected to rise by more than 25% this year, increasing supplies of the fiber. Meanwhile, China, the world's biggest consumer, has announced that it is reducing its imports, reducing global demand.
As a result of higher production and lower demand, world supplies are swelling, with current USDA projections showing that nearly one year's worth of cotton could be sitting in storage by next summer. Without a significant cutback in production or a jump in demand, some analysts fear that prices could wallow for months to come, hurting US farmers across the Southern US, from California to Virginia.
With this recent decline, cotton joins a slew of other commodities that are dropping in price due to oversupply and low demand, including natural gas, corn, copper and sugar, a drastic shift from shortages in each of these markets only a few years ago.