In the summer of 2014, global oil prices began what would become one of the sharpest rates of decline in years. By January 2015, global oil prices plunged to the lowest values since the depths of the 2009 global recession. After only a slight reprieve, August rolled around and Brent, a global oil price benchmark grade, was trading still lower at around $49 per barrel, a roughly 55 percent decrease since July 2014. The American benchmark crude oil, West Texas Intermediate (WTI), was trading at about $42 per barrel, a 60 percent decline during the same period.
According to a World Bank Policy Research Note published in April, the plunge in global oil prices was set in motion by a confluence of several factors:
Together these factors have created an oil glut, the effects of which have been compounded by the broad appreciation of the US dollar. According to the World Bank Note, "Empirical estimates of the size of the U.S. dollar effect cover a wide range: the high estimates suggest that a 10 percent appreciation is associated with a decline of about 10 percent in the oil price, whereas the low estimates suggest 3 percent or less [...] The role of U.S. dollar appreciation - triggered by diverging monetary policies in the United States, Euro Area, and Japan - was an important contributor to the latest decline in commodity prices." (p.14)
Take a closer look at each of the factors discussed by the World Bank with the comprehensive data and visuals provided in this series of dashboards by Knoema.
🏠 US Shale Gas Boom US Oil Production and Alternative Fuels Global Oil Glut US Dollar Appreciation
Brent crude oil price will average at $52.4 per barrel in 2017 and increase to $54.1 per barrel in 2018 according to the most recent forecast from the U.S. Energy Information Administration's Short-Term Energy Outlook released monthly. EIA revised up its forecast for 2018 by 2.5 dollars per barrel from the previous release. However, the real price of a barrel of Brent oil - i.e. price adjusted for inflation - will slightly decrease to $50 in 2018 as predicted by OECD in its June's Economic Outlook. After a modest growth in 2018 though, the nominal price of Brent crude will increase to $53.5 a barrel by 2020, as per IMF's Primary Commodity...
The oil price has fallen by more than 30% since Summer 2014. This affected everyone from producers to consumers. The visualization represents Oil Price Dynamics, Breakeven Oil Price which shows oil prices needed to meet general government expenditure and Marginal Cost of Oil Production which shows the change in total cost of producing one additional barrel of oil. World oil price at $55-$60 / barrel is less than the cost of Russian Arctic oil production, Europe and Brazil biofuels production, shale and tight oil production in US and Canada and offshore oil extraction in Brazil. State budgets of oil-producing countries will suffer from oil...
Slump of oil prices does not slow oil production immediately as it does with investment according to historical evidence. On the contrary, it affects future production through decreased investment in exploration and development of new fields. However, in the current conditions when oil price hovered above break-even price (price at which it becomes worthwhile to extract) for several years the response of production to price decrease may come more quickly. Especially, it concerns countries which experience high operating costs of oil production, namely United Kingdom, Brazil, Canada, Australia. In these countries oil price slump will affect...