The 2014–16 Oil Price Collapse in Retrospect: Sources and Implications

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Oil prices, growth, and remittance outflows from the Gulf Cooperation Council

“…The importance of changes in oil prices as a driver of remittance outflows from the GCC is likely to increase in the future, as oil prices are likely to be lower than in the early 2010s and become more volatile in the future due to structural changes in oil markets in recent years (Stocker, Baffes, Some, Vorisek, & Wheeler, ). Due to the rise of unconventional oil producers like US shale oil and the build‐up of export infrastructure to connect them to international markets, Organization of the Petroleum Exporting Countries is further losing its power to influence the oil prices through supply cuts.…”

“…It is also not always possible to clearly differentiate between oil price supply and demand shocks. While the initial price decline in 2014, for example, seems to have been mainly due to supply factors, weakening demand also contributed to the decline, notably in 2015–2016 (Stocker et al ).…”

Explaining Recent Investment Weakness: Causes and Implications

“…Terms of trade is an important driver of investment growth among oil exporters, given the effects associated with oil price movements (Baffes et al 2015;Stocker et al 2018). In oil exporters, on average, the terms-of-trade shock caused by the oil price decline from 2014 onwards accounted for about one-half of the investment growth slowdown.…”

Price Controls: Good Intentions, Bad Outcomes

“…For example, after 2011, as food prices declined from cyclical highs, some countries eliminated controls. EMDEs such as Mexico, Rwanda, and Côte d'Ivoire took advantage of the sharp decline in oil prices in 2014-16 to reduce petroleum subsidies (Baffes et al 2018;Stocker et al 2015).…”