Oil prices and the global economy: “Oil’s
well” “Oil’s not so well”
Oil prices have decreased dramatically over
the past year. The US has increased fracking, extracting oil from shale
reserves and thus increasing the global supply of oil. This has been compounded
by the fact that Saudi Arabia has refused to cut back on oil production, hoping
that the higher prices of oil would force out the US’ shale industry, thus
increasing her own market share. Meanwhile, there has been decreasing demand
from China as her economy experiences a ‘slowdown’ and shifts from manufacturing
to the service sector. As China is the largest importer of crude oil this has
dampened global demand. Both of these factors have driven the price of Brent
crude oil to below $50 a barrel this month. The effects of such a decrease in the
price of oil on the economy will depend on whether the low prices are sustained
in the future. If prices remain at $50 a barrel, then net oil importing
countries, such as the UK, can stand to benefit from the decrease, whereas net
oil exporting countries could lose.
