Why have oil prices fallen? Is this a temporary phenomenon or does it reflect a structural shift in global oil markets? If it is structural, it will have significant implications for the world economy, geopolitics and our ability to manage climate change. With US consumer prices as deflator, real prices fell by more than half between June 2014 and October 2015. In the latter month, real oil prices were 17 per cent lower than their average since 1970, though they were well above levels in the early 1970s and between 1986 and the early 2000s. (See charts.) A speech by Spencer Dale, chief economist of BP (and former chief economist of the Bank of England) sheds light on what is driving oil prices. He argues that people tend to believe that oil is an exhaustible resource whose price is likely to rise over time, that demand and supply curves for oil are steep (technically, “inelastic”), that oil flows predominantly to western countries and that Opec is willing to stabilise the market. Much of this conventional wisdom about oil is, he argues, false. A part of what is shaking these assumptions is the US shale revolution. From virtually nothing in 2010, US shale oil production has risen to around 4.5m barrels a day. Most shale oil is, suggests Mr Dale, profitable at between $50 and $60 a barrel.