The Fuse

Research: Oil Price Instability and Policy Uncertainty in an OPEC World

February 09, 2016

Guest Post by Roger Meiners, Andrew P. Morriss, and Bruce Yandle |

Roger Meiners holds the Goolsby-Rosenthal Chair in Economics and Law at the University of Texas at Arlington. Andrew Morriss is Dean and Anthony G. Buzbee Dean’s Endowed Chair, Texas A&M University School of Law. Bruce Yandle is a distinguished Mercatus Center adjunct professor of economics at George Mason University.

Two years ago some oil market prognosticators were worried (or happy) that oil could go to $150 a barrel or more. The unexpected collapse in oil prices appears driven by the desire of some OPEC members to reduce competition by opening the spigots. The fall from $115 a barrel to as little as $30 a barrel has discouraged investment in drilling. Oil rig count in the United States is down by two-thirds from its peak. Middle East rig count has not fallen. In this paper we review the rise of U.S. oil production driven by the fracking revolution. Oil price volatility impacts many business sectors and affects federal macroeconomic policy as the Federal Reserve tries to encourage low unemployment and price stability. The history of 40 plus years of oil volatility continues to damage U.S. economic performance.

Read the full analysis: Oil Price Instability and Policy Uncertainty in an OPEC World

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