Monday, January 26, 2015

Cheap Oil and Rising Abundance

My second lecture before graduating management engineering students of Ateneo in their Development Economics class was about cheap oil. Thanks again to their professor and my friend, Joey Sescon, for allowing me to share these data and observations to the students.

As of last weekend, WTI crude oil closed at $4549 a barrel while Brent oil closed at $48.79 a barrel. Wanting to go down to $40 or go up to $50.

Current prices are attempting to go down  the levels in 2009.

The low prices in 2009 were due to global financial turmoil and hence, reduction in demand. Today's low prices are due to huge oil supply.

At 9+ million barrels per day, the US' oil output is similar to Saudi Arabia's, if not larger.

Japan and Europe are still grappling with anemic growth, even threat of deflation, thus oil demand is almost flat. Besides, modern cars, buses, airplanes, are more fuel efficient. They can travel the same distance at lower fuel consumption. It is in Asia and other emerging markets that oil demand is rising significantly.

The PH economy to be the biggest winner in the current cheap oil, good news from Bloomberg.

A brief presentation, these were my conclusions.

* See also, Fat Free Econ 56: Major Global Economic News of 2014, January 07, 2015

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