The rush to attribute lower oil prices to slowing global output growth is misplaced

The rush to attribute lower oil prices to slowing global output growth is misplaced. Annual oil demand has been growing steadily at around one million barrels per day suggesting relatively stable global growth outcomes. Even before the most recent oil price weakness, OPEC had identified the predicament confronting the world market: The combination of new export refineries coming onstream in the Middle East, India and potentially Brazil, a rejuvenated US refining sector driven by domestic oil production and low cost natural gas for fuel and hydrogen, and European refineries desperate to find markets for gasoline so that they can produce more co-product diesel, points to a period of intensified international competition for products markets and a potential need for significant additional closures (2014 World Oil Outlook ). The OPEC analysis suggests that there was going to be a prolonged period of low prices even if global growth rates showed no tendency to decline because refinery capacity was excessive and in the wrong places. These conditions should not be extrapolated to other raw material markets.