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Oil Prices Trending Down - 8/27/15

Oil prices began to trend lower globally about a year ago.  At that time, the expectation among many oil analysts was that the decline in oil prices would be modest and short-lived.  They were wrong.  Today, the price of crude is down in the range of sixty percent from its twenty fourteen peak.  The reasons are clear – global demand for oil is not climbing rapidly as the global economy continues to stumble along. 

Even more importantly, there is an ongoing battle for market share.  If one nation cuts back on production, then the presumption is that another nation will fill the void with its own.  Correspondingly, in a dynamic that is perfectly made for game theorists, global output continues to rise even in the face of collapsing energy prices. 

As reported in the Wall Street Journal, the Americans and Saudi Arabians have actually raised production as prices have fallen in what analysts indicate is a pre-emptive effort to keep competitors like Iraq from stealing customers in Asia.  There are many impacts associated with this, including airfares that have recently begun to decline, cheaper gasoline prices, and a sudden thirst for light trucks and SUVs.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.