April 12th, 2015
from the Dallas Fed
Just last summer, oil prices exceeded $100 per barrel and many analysts expected them to remain high for some time to come (Chart 1). That didn't happen. Prices plunged, falling by more than 50 percent in just six months (Chart 2), the result of weaker-than-expected demand and ample supplies from both the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries. Supply growth was particularly strong in the U.S., with shale oil production booming in 2014.
Sinking prices have implications for economies across the globe. Important oil exporters, such as the OPEC countries, bear the brunt of negative impacts, while oil importers benefit. Overall economic activity in the U.S. will benefit, although lower oil prices will depress activity in many producing states, such as Texas and North Dakota.