How does the crude oil price behave in a recession? Does it go up or down? We go back in history to look at different historical situations where the oil price doubled before a recession happened but we also identify some situations in which something different transpired. Watch our oil analysis and tell us what you think about it as a predictor and/or cause of recessions.
The oil price in a recession is a bit of a conundrum. Many previous recessions are actually attributed to low supply and increased demand for oil, pushing prices higher and thus suffocating the economy (this is of course a simplification).
The crude oil price in 2019 hasn’t given this signal. Although many feared that a recession might be coming to the US and most likely to Europe and Asia, oil prices have remained in the $52-62 range.
Of course, a current oil forecast needs to be aware of the times we are in. The world economy has changed significantly since the recessions back in the second half of the 20th century. It’s even different to the one in 2008!
OPEC appears to be waning in influence, so an agreement to drop or increase production from them doesn’t appear to have the same impact on the crude oil price forecast, as it once did. Even the alignment of Russia with the block hasn’t increased its influence.
There are many reasons for this. From renewables, to increased energy efficiency and geopolitical conflicts across the globe. But the main one is that the US has become the world’s largest energy producer. 18% of global oil production came from the country, equaling 17.94 million barrels a day.
The oil price forecast for 2020 doesn’t appear to be too bullish at this point, with services and manufacturing across the world economy seeing slower growth. But any change in the status quo, be it trade tariffs, monetary policy or inflation, could all impact the oil price.
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