Lutz Kilian, 25 February 2015

Between June and December 2014, the Brent price of crude oil fell by 44%, resulting in one of the most dramatic declines in the price of oil in recent history. This column presents a new quantitative analysis of the market for crude oil. According to the model the authors use, around half of the decline ($27) was predictable using publicly available information. A part of this decline was due to a slowdown in global economic activity, but the major part came from supply and demand shocks in the oil market. Nevertheless, there are reasons to expect the decline in oil prices to end soon.

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