Brent oil, the world standard, relentlessly climbed from a low of $30 per barrel early in 2016 to above $80 per barrel today. A year ago, when Brent was around $55 barrel, some pundits foresaw a return to the 2016 lows; others saw the price languishing in the $50-$60 per barrel range.
Bearish forecasts reflected a tepid outlook for the world economy and expectations of fracking on an ever-larger scale coupled with new finds from deep-water drilling. Few observers reckoned that Brent might again exceed $100 per barrel, as it did between 2011 and 2014, or even reach $80.
Several factors combined to upset these bearish forecasts. On the demand side, massive tax cuts, taking effect in 2018, sparked the U.S. economy with global spillovers. Meanwhile, easy monetary policy in all advanced countries further promoted global growth.
On the supply side, the fracking rig count dropped dramatically when oil prices plunged in 2015 and has recovered only slowly since then. Fracking makes a much larger contribution to natural gas than to oil supply.
U.S. oil production continues to grow, but at a modest pace. Meanwhile, the major oil producers have been cautious about betting $3 billion or more on deep-water drilling off the coast of Brazil or Africa.
President Trump’s renewed sanctions may reduce Iranian oil exports by as much as 1 million barrels a day as European buyers reluctantly cut their purchases. This shock gives Russia and Saudi Arabia even stronger control of world oil supply.The writer could have saved a lot of time had he just written, "it's all Trump's fault."