Helping America Navigate a New Energy Reality

The Problem With Oil Prices Is That They Are Not Low Enough

By on 20 Oct 2015 in analysis, notable posts

CPI-Adjusted US GDP + Trendline & WTI October 2015_150

(ArtBerman.com) The problem with oil prices is that they are not low enough.

Current oil prices are simply not low enough to stop over-production. Unless external investment capital is curtailed and producers learn to live within cash flow, a production surplus and low oil prices will persist for years.

Energy Is The Economy

GDP (gross domestic product) correlates empirically with oil prices (Figure 1). GDP increases when oil prices are low or falling; GDP is flat when oil prices are high or rising (GDP and oil price in the figure are in August 2015 dollars).

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