Long Term Dynamics of Crude Oil Markets: Shifting Paradigms in the Price of Oil

This note provides a long term perspective on the decline in the price of crude oil taking place in the global oil market over the second half of 2014 by analyzing the fundamentals of the crude oil market and how they have changed since 1986, when the first important break of the last 30 years in the price of crude oil took place and also since 2002, when the second break in the price trend occurred. The note first provides an overview of the global petroleum demand patterns, paying particular attention to the shift in demand sources and its impact on the price of crude oil. The note then takes a close look at the changes in sources of crude oil supply that have emerged on the global scene over the past five years, with special attention given to increased output in North America as an explanatory factor behind the decline in the price of crude oil seen over the second half of 2014.