RESEARCH INSIGHT – Why Do Oil Prices Keep Going Down?

This article focuses on the low price elasticity of demand for crude oil in the short run and notes the implications of this observation. Further, the authors discuss what the threshold level of coordination is for a core group of oil swing producers, which would maximize revenue assuming that “other producers do not change their output in response.” The authors observe that the required level of coordination has not occurred and perhaps is not possible, given “varying foreign policy interests and economic structures.” Therefore, the price of oil could to continue its slide.