« The Problem With Oil Prices Is That They Are Not Low Enough

The problem with oil prices is that they are not low enough. Current oil prices are simply not low enough to stop over-production. Unless external investment capital is curtailed and producers learn to live within cash flow, a production surplus and low oil prices will persist for years. Energy Is The Economy GDP (gross domestic product) correlates empirically with oil prices (Figure 1). GDP increases when oil prices are low or falling; GDP is flat when oil prices are high or rising (GDP and oil price in the figure are in August 2015 dollars). CPI-Adjusted US GDP + Trendline & WTI October 2015_150 Figure 1. U.S. GDP and WTI oil price. GDP and WTI are in August 2015 dollars. Note: I use WTI prices because Brent pricing did not exist before the 1970s. Source: U.S. Bureau of Labor Statistics, The World Bank, EIA and Labyrinth Consulting Services, Inc. (click […]

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