The standard explanation is weak Chinese demand, with the oil-price collapse widely regarded as a portent of recession, either in China or for the entire global economy. But this is almost certainly wrong: On all recent occasions when the oil price was halved, faster global growth followed.
LONDON – Violent swings in oil prices are destabilizing economies and financial markets worldwide. When the oil price halved last year, from $110 to $55 a barrel, the cause was obvious: Saudi Arabia’s decision to increase its share of the global oil market by expanding production. But what accounts for the further plunge in oil prices in the last few weeks – to lows last seen in the immediate aftermath of the 2008 global financial crisis – and how will it affect the world economy?
LONDON – Violent swings in oil prices are destabilizing economies and financial markets worldwide. When the oil price halved last year, from $110 to $55 a barrel, the cause was obvious: Saudi Arabia’s decision to increase its share of the global oil market by expanding production. But what accounts for the further plunge in oil prices in the last few weeks – to lows last seen in the immediate aftermath of the 2008 global financial crisis – and how will it affect the world economy?