Energy Prices Fall
By Isaac Cohen*
Oil prices have dropped almost 25 percent in the last four months, despite increased turmoil in the Middle East. This time, both demand and supply side factors are contributing to this change in a market which was stable for almost three years, at $100 dollars per barrel.
On the demand side, the world economic slowdown, excepting the United States, is contributing to the slump in oil prices, particularly in China, which imports almost two thirds of its oil consumption. The same in India, which imports 75 percent of the oil it consumes.
On the supply side, the utilization of new technologies has increased domestic production of oil in the United States, Canada and Brazil. In the last five years, the United States oil output increased by 3 million barrels per day, with the consequent decrease in imports contributing to the glut which is pushing down oil prices.
The same with natural gas, used to heat homes and generate electricity. Increased production this year in the United States, based on new technologies, pushed down domestic prices despite the start of the cold weather season. Also, the United States is already the largest producer and is on the verge of becoming a major exporter of natural gas, competing with other major exporters such as Russia and Qatar.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.