Publications: Notes at the Margin

Recession Avoided (October 21, 2019)


The attacks on the Saudi Arabian oil facilities on September 14 should have sent oil prices up sharply. Indeed, the September 16 issue of this report began, "Here we go again." As explained there, market disruptions of the magnitude of September 14 had always raise prices.


In a supplement we published September 16, titled "Disruptions: Lessons from the Past," we documented the impact of eighteen previous events. We also noted there that, based on a study of past disruptions, a price increase of more than one hundred percent would likely occur after the bombings in Saudi Arabia.


That forecast was wrong. Prices are now two percent lower than they were on Friday, September 13. Markets are stable. There is a very simple explanation for the response: Saudi Arabia acted quickly to address the problem. The view here is that the world escaped disaster because the King Salman had replaced Khalid al-Falih as oil minister with his son, Prince Abdulaziz bin Salman, six days earlier.


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