I offer a simple explanation for the recent fall in oil prices in just two charts.
Oil prices move up and down in response to changes in supply and demand. If the world consumes more oil than it produces, the price goes up. If more oil is produced than the world consumes, the price goes down.
That’s where we are right now. The world is producing more oil than it is consuming. The price of oil goes down. It’s that simple.
The chart below shows when the world has been in a production surplus and a production deficit since 2008. Right now, we are in a production surplus so the price of oil is going down.