Cheap oil may signal permanent economic changes

“Having seen numerous fluctuations in the energy markets over the years, many analysts and policy makers have a natural tendency to “look through” the latest drop in oil prices — that is, to treat the impact as transient rather than as signalling long-term changes. I suspect that view would be a mistake this time around. The world is experiencing much more than a temporary dip in oil prices. Because of a change in the supply model, this is a fundamental shift that will likely have long-lasting effects,” wrote Mohamed El-Erian for Bloomberg News and published in the National Post on December 30, 2014.

El-Erian continued, “Through the years, markets have been conditioned to expect OPEC members to cut their production in response to a sharp drop in prices. Saudi Arabia played the role of the “swing producer.” As the biggest producer, it was willing and able to absorb a disproportionately large part of the output cut in order to stabilize prices and provide the basis for a rebound. Read the full article hereRaymond Matt, CFP, CLU, TEP, CHS  

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