OIL PRICES HAVE TUMBLED ALMOST 30% IN 2 MONTHS. HERE’S WHY, AND WHAT COULD HAPPEN NEXT.
Business Insider - August 10, 2022
- Oil prices have tumbled over the last two months, with Brent and WTI crude down more than 20% since June.
- The three Rs help explain why: recession fears, resilient Russian production, and retreating demand.
- Analysts are divided about what's next, with some predicting a rebound and others expecting the falls to continue.
Oil prices have come back down to earth after soaring in the wake of Russia's invasion of Ukraine, to the relief of politicians, companies, and drivers everywhere.
WTI crude, the US benchmark oil price, has fallen 28% since its most recent highs in early June, to trade at around $90 a barrel Wednesday.
Brent crude, the international benchmark, is down 24% from its own June highs, to trade at around $95 a barrel Wednesday. It's dropped more than 30% from its March high of close to $140.
So why are oil prices falling? The three Rs are to blame: recession fears, Russian resilience, and retreating demand. However, no one's quite sure what comes next.
The world economy is slowing
The key factor pushing prices lower is growing fears that the world's major economies are going to tumble into recessions some time in the next year. When economies slow, the demand for energy naturally drops.
Last month, data showed that the US economy shrank for two consecutive quarters in the first half of the year. Elsewhere, the UK and eurozone look set to slide into brutal recessions.