Lower for Longer

5 Feb

The dramatic decline in the price of oil, along with the entire commodity complex, has led to increased chatter about the possibility of low prices extending out years to come. The phrase lower for longer has been bandied about, having previously been coined in reference to global central bank interest policy. It is important however to make a distinction between centrally administered prices (interest rates) and market driven prices. Putting the power of OPEC aside, one only need look at the crude oil market to see how market forces interact with price, leaving predictions about eternally low prices highly suspect. In free functioning markets, low prices ultimately cure low prices, the only question being, what defines “low”.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

%d bloggers like this: