Oil prices took another nose dive on Thursday on the news that OPEC had refrained from cutting current oil production despite the recent decline in oil prices. The Brent oil price plunged below USD72/bl on Friday morning, leading to a total decline of USD43/bl since the peak in June. The signal from OPEC is clear: it does not want to bear the burden of adjusting production lower to allow for other countries outside OPEC to produce more. So, although the decline in prices is hit ting many OPEC countries, OPEC has chosen short-term pain for longer term gain as the price is now falling below the marginal cost of many oil investments in, for example, US shale industry.
The lower oil price is very good news for western consumers (see Strategy: Big drop in oil price to boost consumption, 21 November). In the US, gasoline prices this week fell below USD2.80 per gallon for the first time in four years and a similar development is being seen in Europe, although the weaker euro is dampening the decline. Other commodity prices – including food – are also falling and adding to the downward pressure on inflation.
The lower oil price is very good news for western consumers (see Strategy: Big drop in oil price to boost consumption, 21 November). In the US, gasoline prices this week fell below USD2.80 per gallon for the first time in four years and a similar development is being seen in Europe, although the weaker euro is dampening the decline. Other commodity prices – including food – are also falling and adding to the downward pressure on inflation.
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