Petroleum Markets: Comparing Two Crises

When the world economy stood at the edge of the abyss after the Lehman Brothers collapse in September 2008 and then went through the ensuing freezing of the financial markets, oil prices plummeted from nearly $150 per barrel for West Texas Intermediate (WTI) by mid-July 2008 to less than $35 per barrel by February 2009. Since then, oil prices have steadily trended upward to roughly $80 per barrel … When the world economy stood at the edge of the abyss after the Lehman Brothers collapse in September 2008 and then went through the ensuing freezing of the financial markets, oil prices plummeted from nearly $150 per barrel for West Texas Intermediate (WTI) by mid-July 2008 to less than $35 per barrel by February 2009. Since then, oil prices have steadily trended upward to roughly $80 per barrel at present. Thus, it is clear that even though the world economy almost went into a tailspin during the crisis, it seems unlikely that petroleum prices will go back to $10s or $20s per barrel as many analysts had expected. We argue that, even if we assume another slowdown in the U.S. economy, petroleum prices will not go back down to the $10s, or even $20s, per barrel that existed during the late 1990s and early 2000s. Thank you for your interest in Wells Fargo’s Economic Commentary by email. You are receiving this message because you have requested Economic Commentary information and updates sent via email. If you no longer wish to receive these emails, please click on the following link to access the Economic Commentary by email registration page: http://www.wellsfargo.com/economicsemail.