The limits of oil's rebound

London

FOR the first time since last October, the price of a barrel of oil has broken through US$50. So it seems a good time to update the analysis I presented in January 2015.

Back then, I argued that US$50 or thereabouts would turn out to be a long-term ceiling for the oil price. At the time, with crude prices still above US$60, almost everyone believed that US$50 would be the rock-bottom floor. After all, futures markets predicted prices of US$75 or higher; the Saudi and Russian governments needed US$100 to balance their budgets; and any price much below US$50 was considered unsustainable, because it would put the US shale-oil industry out of business.