FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 28 June 2015

Oil Markets Offer Few Easy Answers

by Atlanta Fed

When it comes to energy markets, easy answers are scarce.

Did you think oil prices would plummet nearly 60 percent in late 2014 and early 2015? And why have gasoline prices suddenly shot back up this spring?

Pump prices could have risen lately for numerous reasons, but no simple answers exist. As for the first question, few experts foresaw such a dramatic drop in oil prices because "it's almost impossible to predict," Laurel Graefe, Atlanta Fed Regional Economic Information Network (REIN) director, said at a May 18 presentation.

Speaking at the Atlanta Fed's first ECONversations event held before a live audience, Graefe discussed oil price swings and their effects on the broader economy. A central theme of her remarks: global oil prices are the product of an endlessly complex mix of economic, geopolitical, psychological, and other forces.

History clarifies things

History, however, brings some clarity. For instance, Graefe described similarities between conditions today and a major oil price decline in 1986. In both cases, she explained, increases in oil supplies were an important factor in pushing down prices.

Thirty years ago, energy companies tapped offshore oil fields in Alaska and the North Sea, and Saudi Arabia also increased output. More recently, technological advances such as hydraulic fracturing, or fracking, allowed drillers to reach pockets of oil deep underground in the United States. U.S. oil production soared. The larger supply, coupled with lower demand because of global economic weakness, helped lower oil prices, Graefe said.

When oil prices fall because of changes in supply - and not just slack demand - those declines tend to stick, she noted. Graefe said that after oil prices began falling in the mid-1980s, they didn't surpass their 1986 peak for good until about the year 2000.

Why hasn't consumer spending climbed faster?

Turning to the macroeconomy, oil and gas prices are at the center of an important conundrum. On one hand, falling gasoline prices have put more money in people's pockets and boosted consumer sentiment regarding the economy. Yet overall consumer spending has not grown as much as economic fundamentals suggest it should.

That restraint by consumers is important because consumer spending accounts for about two-thirds of the nation's gross domestic product (GDP) and is critical to economic performance for the rest of 2015, Graefe said, citing a recent speech by Atlanta Fed President Dennis Lockhart.

In another way, falling oil prices already dinged economic growth. During the first quarter of 2015, energy companies spent less on infrastructure, contributing to slower GDP growth.

ECONversations are high-level updates on economic and policy issues and offer the public a chance to talk with Atlanta Fed experts. Previous sessions were webcasts only.

Click here for Historical News Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Contributors


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Comments on Feyerabend’s ‘Against Method’, Part II
Comments on Feyerabend’s ‘Against Method’, Part III
News Blog
Rail Week Ending 15 October 2016 Paints A Negative Economic View
What Is The New Normal For U.S. Growth?
Affordable Care Act And Its Effect On Part-Time Employment
The Speed Of Filling Jobs Is Declining
First Working Eggs Made From Stem Cells Points To Fertility Breakthrough
Infographic Of The Day: Mega Machines
Online Platforms Double Down On TV Programming
A History Of Mars Missions
How Tesla Out Innovates Traditional Carmakers
Schiaparelli's Descent To Mars In Real Time
September 2016 Existing Home Sales Still Not Excellent
September 2016 Leading Economic Index Improves Indicating Moderate Growth Ahead.
October 2016 Philly Fed Manufacturing Survey Declines But Remains In Expansion.
Investing Blog
Options Early Assignment - Should You Worry?
The 401k Plan Manager 17 October 2016
Opinion Blog
Prop. 51 Versus A State-Owned Bank: How California Can Save $10 Billion On A $9 Billion Loan
Obama's Middle East Policy Has Been A Complete Failure - Or Has It?
Precious Metals Blog
How Will The Election Outcome Impact Precious Metals?
Live Markets
20Oct2016 Market Close: US Indexes End Flat After Choppy Session, Nigeria Slashes Oil Prices, Crude Prices Continue To Slip, Bullish Investors Not So Bullish Anymore
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved