Brenda Shaffer argues that 2018 marked a new phase in the oil price cycle. Prices topped $70 a barrel before settling around $65. She says the move reflects simple supply and demand, not hidden forces.
Demand is rising as global growth accelerates. Supply is strained by falling output in Venezuela and geopolitical risk in the Gulf, including tensions between Saudi Arabia and Iran. Low investment during the years of cheap oil, combined with shrinking global inventories, has tightened the market. That makes prices more sensitive to these events.
Shaffer expects the cycle to keep turning, since higher prices are already spurring more North American shale production. She also argues that OPEC’s influence over the market has been overstated.
A bigger structural shift is underway too: the US has become the world’s top oil producer for the first time since 1970. That changes how oil price swings affect the American economy. Shaffer argues Washington should now revisit long-standing policies like the Strategic Petroleum Reserve in light of that shift.
