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Research Reports

Cheaper Oil - Is it here to stay? (Bilingual)

January, 2015

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Executive Summary

After reaching a high of $115.19 per barrel for the year so far, the price of Brent crude dropped to about $61.38 by 21 December 2014, a fall of about 47%. This precipitous drop has left many analysts and policy makers perplexed and even troubled. A combination of excess supplies, tenuous demand, OPEC's decision not to cut daily output target, and a stronger dollar has been blamed for the decline.

The history of oil, as a commodity, is riddled with several alarmist forecasting episodes over the years. In the 1950s and 1960s, there were rampant fears that the growth of demand in oil was unsustainable and that it could lead to unaffordable prices. Prices did rise in the 1970s and early 1980s on the back of demand growth and geopolitical movements impacting oil from the Middle East; but the spikes were countered by an economic recession and discovery of oil in new areas (e.g., North Sea in Europe).

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