15th September 2016

It is now two years since oil prices halved in the second half of 2014. The chart below reminds us that this fall was far less severe than the oil price collapse during the GFC, when prices recovered very quickly. Why aren’t prices beginning to recover now?

The causes of the two price falls were very different. The 2008 collapse was triggered by factors outside the oil market – specifically, the GFC’s liquidity crisis which shut down bank lending and trade finance, followed by lower demand as a result of the recession in developed countries. But when central banks pumped up liquidity, global oil demand recovered… [see more]