Are Low Oil Prices Here to Stay?

The recent collapse of oil prices raises questions not only about why, but, more significantly, about whether the new low-price regime will last. The answer on oil, as always, requires a look at three component considerations: (1) actual global demand for oil and gas, (2) actual global supply and (3) anxieties, usually based on geopolitics, about the first and second considerations. All three change constantly, seldom as forecast, but it is the third, the least stable of the three, that causes the sudden, dramatic price moves, including this recent one. Moderating demand and increasing supplies have played a role in the recent drama, to be sure, but the price decline stems largely from an abatement in geopolitical anxieties, at least as they pertain to oil. Such concerns will, however, likely return, confirming the now-well-established historical rule that no oil-price regime lasts long.