In November 2014, the Organization of Petroleum Exporting Countries (OPEC) decided to maintain output despite a perceived global glut of oil. The result was a steep decline in price.
Two years later, on November 30, 2016, the organization took a different tack and committed to a six-month, 1.2 million barrel a day (3.5 percent) reduction in OPEC crude oil output to 32.5 million barrels per day, effective in January 2017. The result was a small price increase and some price stability. […]
While oil prices have stabilized somewhat in recent months, there are good reasons to believe they won’t return to the high levels that preceded their historic collapse two years ago. For one thing, shale oil production has permanently added to supply at lower prices. For another, demand will be curtailed by slower growth in emerging markets and global efforts to cut down on carbon emissions. It all adds up to a “new normal” for oil.
Oil prices have been persistently low for well over a year and a half now, but as the April 2016 World Economic Outlook will document, the widely anticipated “shot in the arm” for the global economy has yet to materialize. We argue that, paradoxically, global benefits from low prices will likely appear only after prices have recovered somewhat, and advanced economies have made more progress surmounting the current low interest rate environment.
Oil prices have plunged recently, affecting everyone: producers, exporters, governments, and consumers. Overall, we see this as a shot in the arm for the global economy. Bearing in mind that our simulations do not represent a forecast of the state of the global economy, we find a gain for world GDP between 0.3 and 0.7 percent in 2015, compared to a scenario without the drop in oil prices. There is however much more to this complex and evolving story. In this blog we examine the mechanics of the oil market now and in the future, the implications for various groups of countries as well as for financial stability, and how policymakers should address the impact on their economies.
- We find both supply and demand factors have played a role in the sharp price decline since June. Futures markets suggest that oil prices will rebound but remain below the level of recent years. There is however substantial uncertainty about the evolution of supply and demand […]