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EconoMeter: Biggest surprise of 2014

Roger Showley, U-T SAN DIEGO

Friday, December 19, 2014

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Kelly Cunningham, National University System
Answer: Oil prices

Prevailing explanations for the collapse of oil prices are mismatches between surging supply and diminishing demand. But little evidence suggests such conditions occurred on the global stage. According to the International Energy Agency (IEA), global demand for crude oil is 3.6 percent higher than average demand over the past five years. While new drilling techniques -- fracking -- revolutionized energy production in the U.S. and Canada, increased production had limited impact on the global stage. IEA estimates world demand exceeds supply by only 0.6 percent so far in 2014, which does not suggest a glut. Lower prices, unfortunately, are not likely to last long.