The 2014-16 Oil Price Collapse in Retrospect: Sources and Implications

35 Pages Posted: 1 May 2018

See all articles by Marc Stocker

Marc Stocker

World Bank

John Baffes

World Bank

Y. Modeste Some

International Monetary Fund (IMF)

Dana Vorisek

World Bank

Collette Mari Wheeler

World Bank

Date Written: April 30, 2018

Abstract

With the benefit of hindsight, this paper provides a fresh and comprehensive look at the causes of the 2014-16 collapse in oil prices and its impact on the global economy. It disentangles the contribution of supply and demand factors, assesses the impact on activity in oil exporters and oil importers, and reviews policy responses in these countries. The main conclusions are: (i) the decline in oil prices was predominantly triggered by supply factors, particularly rapid efficiency gains in U.S. shale oil production, but softening demand prospects played a substantial role as well; (ii) the short-term benefits of falling oil prices for the global economy were muted by economic rebalancing in China, a low responsiveness of activity in other oil-importing emerging markets, and a sharp slowdown in U.S. investment as energy sector activity declined and a the U.S. dollar strengthened; (iii) oil exporters with flexible exchange rates and relatively large fiscal buffers fared better than others, but most oil-exporting economies still face significant policy challenges as their medium-term prospects for growth and fiscal revenues have deteriorated; (iv) fundamental changes in the oil market make a return to the oil price levels of the early 2010s unlikely, pointing to the need for accelerated reforms, particularly among oil exporters.

Keywords: Energy and Environment, Energy Demand, Energy and Mining, Macroeconomic Management, Economic Adjustment and Lending, Public Sector Economics, Public Finance Decentralization and Poverty Reduction, Macro-Fiscal Policy, Services & Transfers to Poor, Energy Policies & Economics, Disability, Economic Assistance, Access of Poor to Social Services, Inflation

Suggested Citation

Stocker, Marc and Baffes, John and Some, Y. Modeste and Vorisek, Dana and Wheeler, Collette Mari, The 2014-16 Oil Price Collapse in Retrospect: Sources and Implications (April 30, 2018). World Bank Policy Research Working Paper No. 8419. Available at SSRN: https://ssrn.com/abstract=3171286

Marc Stocker (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

John Baffes

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/jbaffes

Y. Modeste Some

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dana Vorisek

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Collette Mari Wheeler

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
44
Abstract Views
200
PlumX Metrics