Publications: Notes at the Margin

Inventories, Oil Consumption, and Crude Oil Prices (September 2, 2024)

 

Crude oil inventories and consumption are closely linked in most attempts to model oil price behavior. That relationship, though, is not stable. Thus, models that fit historical data will generally fail to project future price trends. We can offer numerous explanations for the breakdown. The most important is likely the varied success of oil-exporting countries in managing and maintaining agreements to curtail production and stabilize prices. Prices will be higher when they succeed and vice versa. Predicting their success in controlling output, then, becomes a key factor in modeling prices.

 

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