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Global Implications of Lower Oil Prices

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Global Implications of Lower Oil Prices

IMF,

5 min read
5 take-aways
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What's inside?

The new normal of lower energy costs has global economic consequences, both good and bad.

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Editorial Rating

8

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  • Innovative

Recommendation

Many observers believed the massive drop in oil prices that began in mid-2014 would have a significant positive impact on the world economy. Instead, experts have adjusted global growth forecasts downward for 2015–2016. In a new era of low oil prices, both winners and losers will emerge, and countries must adjust their policies accordingly. This comprehensive and accessible report from a multidisciplinary team of economists at the International Monetary Fund offers readers a solid grounding in the shifting dynamics of energy prices. getAbstract recommends this informative text to energy producers and energy consumers everywhere.

Summary

Understanding the impact of lower oil prices must begin with a discussion of why they dropped so dramatically in such a short time. Between June 2014 and January 2015, oil prices plunged by about 50%, due mostly to greater supplies: The United States developed its shale oil reserves, and OPEC nations such as Iraq, Libya and Saudi Arabia exceeded their expected output. In late 2014, OPEC decided not to limit production. At the same time, demand deteriorated in Europe and Asia. While speculators may have exacerbated oil price swings, they didn’t cause the drop. In fact, the extent of the decline caught the market...

About the Authors

Aasim M. Husain et al. are economists with the International Monetary Fund.

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