Oil touches every aspect of our lives and its price is crashing. Here are just some of the mixed blessings that may flow – from cheaper holidays and safer sex to busier roads and more terrorism

Cheaper petrol but higher insurance premiums for motorists

It doesn’t take a rocket-fuel scientist to see that an early consequence of a fall in the price of crude oil will – eventually – be cheaper petrol, which is plainly good news for motorists. According to the RAC Foundation, Britain’s drivers spent an estimated £2.57bn on fuel last month, about £330m less than they spent in July, when crude oil was still trading at over $100 a barrel. In research done for the Sunday Telegraph, the foundation calculates that the owners of Britain’s 28m cars should save around £4bn this year, compared with what they would have spent had petrol prices stayed at last summer’s level of £1.33 a litre – about £140 per motorist. (And that’s based on petrol prices sticking where they are now; they could yet fall further.)

But it’s not all good news. Because what will motorists do with the extra cash burning a hole in their pockets? Drive more miles, for one thing. And driving more miles means spending more time on the road, which will almost inevitably lead to more accidents. And more accidents lead to … higher insurance premiums. In fact, this phenomenon seems already to be happening: according to research carried out jointly by the comparison website confused.com and consultants Towers Watson, although the price of the average car insurance premium fell by £51 overall last year, it rose by 2%, or about £12, in the final quarter – partly because with petrol prices now 20% lower than during the summer, people were making more use of their cars.

Stephen Jones, UK head of property and casualty pricing at Towers Watson, says the past three months of the year were driven by “falling fuel prices leading to increased driving [and] increasing accident frequency”. Britain’s drivers clocked up 77.9bn miles in the final three months of 2014, around 2.2% more than in the same quarter of the previous year, according to the British Society of Motor Manufacturers and Traders (SMMT), and logically, the number of insurance claims they submitted followed the same curve. Jon Henley

More new cars hitting the road

Cheaper petrol means more cars on the road. Photograph: David Sillitoe/Guardian

Along with other factors including greater confidence in the economy, lower petrol prices may also tempt more people into buying a new car. The SMMT reported that nearly 2.5m new cars were registered in 2014, the highest level in a decade and nearly 10% more than in 2013. According to the Department for Transport, there were around 525,000 more cars – almost 2% of the total – on Britain’s roads at the end of last year compared with the end of 2013. And the New Year seems to have got off to a similar start: the car sales website motors.co.uk says the first 10 days of 2015 “hit record levels on all key metrics”. Page views for premium brands such as BMW, Mercedes, Audi, Jaguar and Land Rover have more than trebled, the company says, adding that it attributes the exceptional start to the year to “a combination of an improving economy and the lower cost of fuel”.

But SMMT spokesman Ben Foulds says it is far too soon for the automotive industry to start making assumptions about changes in the kind of cars people will want to buy, or manufacturers to make. “We don’t see much effect in the short to medium term,” he says. “Consumers may have a bit more money in their pockets and confidence in terms of spending, but the industry now is about fuel economy and efficiency and the increases have been considerable.” That focus is not about to change soon, Foulds suggests – adding that Jaguar’s much talked-about first SUV, the monster F-Pace unveiled at the Detroit motor show, “will have been in planning for a matter of years”. JH

Russian tourism dries up



In recent years, Russian tourists have joined ranks with the Chinese to become major cash cows for holiday destinations around the world. With the conflict in Ukraine, subsequent sanctions from the west and a drop in the value of the rouble, their numbers are already in decline. The drop in oil prices will only add to this. “Economic growth might be dented in countries which are oil exporters,” says John Kester, trend researcher at the United Nations World Tourism Organization (UNWTO). “The Russias and the Nigerias of the world might see fewer people travelling.” And this will have knock-on effects for the countries that traditionally host them. As Dr George Filis, associate professor in financial economics at Bournemouth University, explains: “I’m from Greece and one of our largest markets is Russian tourists. So if they stop coming, that could be quite damaging.” Will Coldwell

Airline profits on the rise

The aviation industry has been struggling financially for years, particularly since 2010 when oil prices began to rise significantly. Margins and profits have been squeezed in order to keep ticket prices down. Now, as Filis explains, is a “golden opportunity for airlines to correct their balance sheets”. In the short term, ticket prices are likely to remain the same, while airlines enjoy an increase in profits and happier shareholders. The fact that airlines make contracts for fuel months in advance of their needs will also delay any price changes. But if oil prices stay down throughout the year, consumers will start to see cheaper tickets. “I would be extremely surprised if it doesn’t eventually pass on to the passengers,” says Filis. WC

Cheaper flights to exotic, long-haul destinations

Facebook Twitter Pinterest Ticket prices should eventually fall. Photograph: Antony Nettle / Alamy/Alamy

The economic boost from lower oil prices should mean the UK public has a bit more disposable income to spend on holidays and, if there is an eventual reduction in travel costs, could be jetting off more readily to further-flung destinations. “When oil prices are high it slightly encourages short haul flights,” says Kester. “And when they go down there’s a slight swing towards long haul. But this is still balanced with exchange rates and other factors; often the cost of living in long haul destinations is relatively low while getting there is relatively expensive.” In December, the International Air Transport Association (IATA), predicted the average return air fare, excluding taxes, would fall by 5.1% in 2015. Chris Goater, a spokesman for the organisation, acknowledges that there will be a time lag before consumers enjoy cheaper prices, but adds: “The airline industry is very competitive and airlines price aggressively in order to hold on to their market share. Consumers generally do very well out of the situation.” WC

Safer sex

The shrivelling oil price has an unexpected bonus – cheaper and safer sex. A fall in the price of crude should result in cheaper condoms – or at least those made sythentically, from materials such as polyurethane, where the price is determined by the market price for oil.

Sexual lubricants could become cheaper too – as “much of the intimacy product market is still dominated by petrochemical- based products” according to Wendy Strgar, -“Loveologist” at Good Clean Love. Patrick Collinson

Cheaper mortgages, and more pain for savers in the UK

The fall in the headline rate of inflation to its lowest ever level of just 0.5% – largely a result of the dramatic collapse in the price of crude – will benefit millions of homebuyers with “tracker” style mortgages, as the prospect of a rise in interest rates recedes by the day.



Last year most economists thought interest rates would start to march back up again by the end of 2014. But it didn’t happen, and now many expect them to remain at historically low levels long past the election and into 2016.

Lenders have reacted by issuing some of the cheapest fixed-rate deals ever seen in Britain. Barclays has brought out a loan fixed for 10 years at just 2.99%, while HSBC is offering a two-year fix at just 1.29%. With some speculating that inflation could head to zero if the oil price continues to drop, expect more record low mortgages to follow.

More money in buyers’ pockets and cheap mortgages are usually the recipe for a property boom, yet virtually every major house price index is pointing downwards. Housing has cooled rapidly in recent months, especially in London, where the “prime” market is suffering with Russian oligarchs dependent on oil riches now short of a million or two to throw at a flat in Knightsbridge.

But spare a thought for savers with ISAs, who outnumber mortgage holders seven-to-one – and can expect no early relief from years of paltry payouts. “Cash deposit rates are surely going to stay lower for longer as a result of falling inflation. The governor of the Bank of England is highly unlikely to raise rates while at the same time writing a letter to the chancellor to explain why inflation is so far below target. Short term, savers have little choice but to grin and bear it,” says Laith Khalaf of Hargreaves Lansdown. PC

Saudi Arabia keeps the squeeze on Iran

An oil field in Saudi Arabia, the world’s largest oil producer and exporter which is seeing increased tensions with Iran. Photograph: Ali Haider/EPA

Saudi Arabia, the world’s largest oil producer and exporter, is also regional standard-bearer for the majority Sunni Muslim branch of Islam. The Saudis’ big rival is majority Shia Muslim Iran, with which it is embroiled in a proxy war for power and influence across the Middle East. The Saudis, emboldened by nearly $1tn in cash reserves, have consistently refused to prop up the plunging oil price by cutting production. Their motive, at least in part, may be a deliberate attempt to squeeze the Iranian economy and weaken Tehran’s clerical regime. About 60% of Iran’s exports are tied to oil.

Some analysts suggest the Saudis are in cahoots with the US, which (with the EU) has imposed tough sanctions on Iran over its alleged covert effort to acquire nuclear weapons capability. Barack Obama, overriding Israel’s objections and eager for a diplomatic coup before he steps down, is pursuing a nuclear pact with Iran; the deadline is July. Oil price pressure may be one way of forcing a deal.

The Saudis have additional objectives. With Qatar, they want to neutralise Iran’s support for the Assad regime in Syria, which they deplore. They also want to reduce Iranian influence with Hezbollah in Lebanon and Shia groups in Bahrain, Yemen and elsewhere. Iran is undoubtedly feeling the pressure. It warned on Tuesday that the Saudis and oil-rich allies such as Kuwait were making a “strategic mistake” that they would come to regret. Simon Tisdall

Russia pulls even further away from Europe

The falling oil price has severely damaged President Vladimir Putin’s regime in Russia, which is heavily dependent on oil and gas revenues and cannot balance its budget at current prices. Putin has already signalled public sector wage freezes and spending cuts. The economy is set to shrink by 5% as the rouble’s value falls and consumer prices rise. Russia’s annexation of Crimea and intervention in eastern Ukraine last year provoked western sanctions, exacerbating economic problems. Putin’s generally more aggressive geopolitical stance vis a vis Nato and the west has also raised anxiety levels in Washington.

As with Iran, it is suggested the US and Saudi Arabia have colluded on oil to punish Russia over Ukraine, curb future expansionism, and weaken its support for Syria’s Assad. There is a precedent. In 1998, the Saudis, resentful of Russian competition, sent the oil price plummeting; Russia defaulted on its debts. Russia currently has about $400bn in reserves, but private sector debt amounts to about $700bn.

Facebook Twitter Pinterest China’s Shengli oil field: Russia is building an energy alliance with China. Photograph: WU HONG/EPA

If Russia is squeezed enough, it is argued, Putin may back down on Ukraine. But don’t hold your breath. The Russian leader says the answer is to diversify the Russian economy away from oil. He has also begun to woo China with multi-billion dollar energy deals. This eastwards “pivot” could have long-term strategic implications for Russia’s relations with Europe and US, forcing two of the world’s most authoritarian regimes into alliance. ST

Woes for Venezuela, Cuba and Brazil

Venezuela, a leading oil exporter and champion of populist, leftwing politics across Latin America, has been badly hit, and has predictably blamed its plight on a US-led conspiracy. Given its sharp ideological differences with Washington, this claim is not beyond the realms of possibility.

Venezuela has long helped bankroll Cuba’s economy, for example, sending 80,000 barrels of oil daily. Oil makes up 95% of Venezuela’s exports. According to market analysts, political instability coupled with economic woes could lead Caracas to default. Beleaguered Cuba, meanwhile, had little choice but to cut a deal with the old enemy, Washington, which it duly did last month. One unexpected result: demand for embargoed Cuban cigars in the US is set to boom.

For other developing countries, the oil price fall could prove a mixed blessing. Brazil’s rapid economic advance has been checked. But impoverished Chad, for example, is planning to double production this year. Like other smaller producers, it says incentives for a healthy diversification of the economy have grown. ST

Boko Haram and Islamic State terror threat grows

Nigeria’s exports are almost entirely oil-related. Its currency lost 13% of its value in 2014 due to falling prices. Reduced government income will inevitably affect Nigeria’s already limited ability to counter the Islamist extremists of Boko Haram, whose civilian atrocities have plumbed new depths.

Deepening poverty, lack of education and unemployment, exacerbated by falling state revenues from oil, have serious implications for terrorism and stability elsewhere in the Sahel region, in Sudan and South Sudan, and in energy-rich Libya, scene of growing anarchy since the western intervention in 2011. Worse still, Islamic State terrorists in Iraq have seized oilfields and profited from illicit sales. For them, the windfall price is largely immaterial. Not so the Kurds of northern Iraq. Aspirations for Kurdish self-rule or independence may have been set back by falling revenues. ST

Bad news for the SNP and frackers

Facebook Twitter Pinterest If the Scots had voted ‘yes’, they might have faced a £15.5bn shortfall in revenue. Photograph: Jeff J Mitchell/Getty Images

• The falling oil price has blown an enormous hole in Alex Salmond’s economic prospectus for an independent Scotland. If the Scots had voted ‘yes’ last autumn, they might now be looking at a £15.5bn shortfall.

• Continuing low oil prices could help defuse a new conflict between Britain and Argentina over the Falklands (Malvinas) islands. Exploiting disputed offshore fields there may prove uneconomic.

• Something similar may happen to the so-called shale gas revolution. Low prices have undermined the already established shale gas industry in the US. If they persist, they may kill off controversial fracking plans in the UK. ST