The sharp drop in oil prices is one of the most important global economic developments over the past year. The SDN finds that (i) supply factors have played a somewhat larger role than demand factors in driving the oil price drop, (ii) a substantial part of the price decline is expected to persist into the medium term, although there is large uncertainty, (iii) lower oil prices will support global growth, (iv) the sharp oil price drop could still trigger financial strains, and (v) policy responses should depend on the terms-of-trade impact, fiscal and external vulnerabilities, and domestic cyclical position.

This paper presents a simple macroeconomic model of the oil market. The model incorporates features of oil supply such as depletion, endogenous oil exploration and extraction, as well as features of oil demand such as the secular increase in demand from emerging-market economies, usage efficiency, and endogenous demand responses. The model provides, inter alia, a useful analytical framework to explore the effects of: a change in world GDP growth; a change in the efficiency of oil usage; and a change in the supply of oil. Notwithstanding that shale oil production today is more responsive to prices than conventional oil, our analysis suggests that an era of prolonged low oil prices is likely to be followed by a period where oil prices overshoot their long-term upward trend.

This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.

In 2001, Kenneth Deffeyes made a grim prediction: world oil production would reach a peak within the next decade--and there was nothing anyone could do to stop it. Deffeyes's claim echoed the work of geophysicist M. King Hubbert, who in 1956 predicted that U.S. oil production would reach its highest level in the early 1970s. Though roundly criticized by oil experts and economists, Hubbert's prediction came true in 1970. In this updated edition of Hubbert's Peak, Deffeyes explains the crisis that few now deny we are headed toward. Using geology and economics, he shows how everything from the rising price of groceries to the subprime mortgage crisis has been exacerbated by the shrinking supply--and growing price--of oil. Although there is no easy solution to these problems, Deffeyes argues that the first step is understanding the trouble that we are in.

"World Energy Outlook 2008 draws on the experience of another turbulent year in energy markets to provide new energy projections to 2030, region by region and fuel by fuel, incorporating the latest data and policies. "

This book explains why oil prices rose so spectacularly in the past and examines how they will be suppressed in the future.