The price for Brent crude has dropped below the $100 milestone for the first time since October. It is another signal that the world is: 1) no longer worried about a major supply interruption, and 2) a slowing global economy has damaged demand and will continue to do so. The drop comes at just the right time.
There have been concerns for months that high oil prices, the prices of petrochemical products, and the rising cost of gasoline would knock the frail recovery off its axis. Now that the recovery has already been knocked, low oil prices may help stabilize troubled economic growth–or at least not make it worse.
The one lingering problem about oil prices is that OPEC has signaled the $100 oil is about right for its members to put money in their national treasuries without the price undermining the global economy. OPEC has kept production almost as high as it can. It remains to be seen if that will continue if Brent falls much more.
Douglas A. McIntyre
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