Is the Oil Price Fall a Good Thing?

Glass half full or half empty? Probably a bit of both - as one of my wine suppliers put it > either way there's room for more wine!

There are two main drivers for the slump in price: on the supply side non-OPEC producers (principally the US and Canada) have sharply increase production (think fracking); on the demand side there is economic weakness in many developed nations (Europe, Japan, China).

The supply side factor is probably the dominant one so there's reason not to read the falling price as indicating catastrophic demand shrinkage as a result of economic woes. Indeed Christine Lagarde recently suggested that the oil price weakness could add 0.8% to GDP growth for many advanced economies.

All in all what we are seeing is a transfer of wealth from oil producers to oil consumers.

Of course, none of this helps the greening of our energy supply.