The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.

The end of the era of cheap oil

The price of oil is at its highest level for nearly a decade. Since the end of the Gulf War in 1991, the per-barrel price of crude has traded below its historical average of around $20. And it’s no coincidence that during this time the global economy has enjoyed almost unparalleled prosperity. Low energy prices have allowed new-paradigm economists to declare inflation dead. It may be stirring in its grave. And while industrialized nations are less dependent on oil than in the past, it’s importance in transport is still enormous. No-one is sure where the oil price goes from here, nor what the consequences might be of a sustained price rise. Jonathan Brown reports

The recent marked increase in oil prices has, most notably, led to increased petrol prices causing vocal protests from the people of the industrialized nations. But worse may be to come. It is possible that, should oil prices continue to stay above $30 a barrel, the world's economy will not just slow down but enter a period of recession.


The plain fact of the matter is that, despite the developments over the last few years in what has been dubbed the new economy, the world still runs on oil and the oil market has a profound influence on the economy of the world. US Federal Reserve chairman Alan Greenspan, in a speech in late October to the Cato Institute, said: "The re-emergence of oil prices as an important macroeconomic consideration is a reminder that there is less of a stark division between old and new economies than is often loosely suggested." While stating that, up to now, the effects of the price hike have been minimal, he advised that: "Policymakers will need to be on the alert for oil-driven, indeed energy-driven, risks to our expansion."


       
The sun may be sinking on a period of low oil prices

A report by Merrill Lynch supports the view that we are moving towards a new, higher level for oil prices: "Merrill Lynch's longer term oil price outlook is the view that crude prices will normalize well above the 10-year historical average.



You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree