Reality Shows Up in the Price of Oil: Will China be Next?

What happened to all the happy talk about the collapse in the price of oil? Wasn't this supposed to be a boon to the economy? It was not much more than a week ago when we talked about this. At the time we suggested that under the surface of this rather sunny interpretation of the oil story, lurked a a much darker side. Now the dark side of the story, after gurgling in the background, appears to be bubbling up. 

LONDON—Oil prices continued to slide in volatile trading on Wednesday as concerns about global growth send chills across the commodity spectrum.

Not that the story is all black, of course. The U.S. economy still shows signs of exuberance, and we suspect those signs will continue to manifest themselves, at least in the short term. But the reality for the rest of the world isn't quite so optimistic.

The World Bank cut its global economic outlook late on Tuesday.

Still, this isn't quite ominous news. China will likely be the source of ominous news, were that country's economy to slow down significantly. It's slowing all right, but the good news as currently reported appears to be this:

The World Bank also added that China, the world’s top energy consumer, is undergoing a “carefully managed slowdown” with growth slowing to 7.1% this year, from 7.4% in 2014.

The question we mus ask ourselves is whether a "carefully managed slowdown" describes what's really happening, or whether the World Bank has fallen under the spell of the Chinese Communist government's - let's face it - phony statistics. If the latter, then trouble is gurgling below the surface. Will a "real story" bubble up, as it just has regarding the collapse in the oil price? We wait and wonder, although we suspect the gurgling may turn to bubbling some time in 2015.