Oil prices in 2019

The price of crude oil ($/barrel, Jan. 2018-Jan. 2019)
Oil prices dropped sharply at the end of last year. Where they end up this year will have a lot to do with the decisions U.S. producers make (source: macpixxel for GIS)
  • Long-term, shrinking extraction costs will have the biggest impact on oil prices
  • In the short term, producers are likely to run down their inventories
  • Thereafter, American producers may restrain production to push up prices
  • President Trump could convince the Saudis and Russians to do the same

Oil prices behaved according to the rule book for most of 2018. As fears about an all-out global trade war receded, expectations grew that oil demand would rise. Hence, oil prices increased by almost 30 percent, from about $58 per barrel in January 2018 to about $75 in early October. During the next three months, however, oil prices collapsed to about $45 (40 percent), though they have since recovered somewhat, to about $53. What happened? And what will happen next?

To be fair, some alarm bells were already ringing almost a year ago. Last spring, oil prices crossed the $60 threshold and several observers promptly pointed out that something was amiss.

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