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Oil Price Collapse: Supply or Demand?

By Matthew Kerkhoff


As oil prices plunged in recent months, debate heated up regarding whether the drop was due to falling global demand, rising supply, or a combination of both. For substantial periods during the declines, equity markets traded in sync with the price of oil, indicating a widespread belief that falling global demand was the culprit. Lower overall demand implied global economic weakness, and a reason to sell stocks.


Equity markets have since disconnected from this thesis and for good reason. According to recent estimates from research firm Energy Aspects, Global demand for crude hit a record high in December of 2014, growing by 2.2 million barrels per day, the fastest annual pace in a year and a half.


Without question some of this increased demand is a direct result of lower oil prices. We've seen a recent pickup in gasoline demand and sales of light trucks and SUVs are outpacing their more fuel ... Log in or subscribe to continue reading.

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