Malcolm Maiden
The Age
December 2, 2014
Oil is a key economic input and its price has fallen sharply. All things being equal, that’s a plus for global growth, but the markets are in turmoil. Here are six key reasons why oil’s price plunge has the markets gyrating.
THIS IS AN OIL PRICE SHOCK
In 2011, 2012 and last year oil averaged $US95.13 a barrel, $US94.15 a barrel and $US98.05 a barrel respectively, a spread of just $US3.90. It averaged $US100 a barrel in the first six months of this year and got to $107.26 a barrel on June 20. Monetary policy was still loose and the consensus was that the oil price would not move sharply in either direction.
Instead, it tipped into an accelerating price slide, to about $US75 a barrel ahead of last week’s meeting of the Organisation of the Petroleum Exporting Countries (OPEC). It hit $US66.15 a barrel on Monday, after the world’s biggest producer, Saudi Arabia, failed to back OPEC production cuts, and was still below $US70 a barrel on Tuesday despite a 3 per cent-plus bounce. Investors didn’t see the price slide coming, and haven’t worked out what it means. Continue reading “Six reasons oil’s price plunge has shaken the markets”