Tag Archives: Demand

Oil is not as it seems: Expectations of future oil supply key to explaining drop in price

Gene Kindberg-Hanlon & Menno Middeldorp 

The sharp fall in the oil price in late 2014 was mostly due to supply rather than demand, with expectations of future supply more important than shifts in current production. We can conclude this by comparing a model using economic data with another using asset prices that capture expectations of future oil supply. Our supply side explanation implies the fall in the oil price is mostly good news for the UK and other oil importers, rather than mainly a signal of a weaker global economy.

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