Larry Summers: Oil Prices Should Stay Down

The acclaimed economist talks oil prices, energy independence, and America's unavoidable market vulnerability.

Larry Summers:  The main reason why oil prices are falling is that we had a stretch of time where we had rising supply from North America matched by falling supply from other places because of developments in Libya and developments in Iraq, developments in Iran. And the run of bad supply developments has largely stopped and the positive supply developments in the United States have continued. And the expectation that that will continue in the future is leading to a significant decline in the price of oil. My guess and guesses about oil prices are highly problematic is that they’re going to stay down, since it seems to me there’s probably more room for positive supply surprises from here than there is for negative supply surprises. No one really knows the price sensitivity of tight oil, shale type oil in the United States. My best guess would be that at prices above $60 the broad trend towards increasing U.S. supplies will continue.

And so I think we are making progress towards energy independence though I think energy independence is a somewhat complex goal and may mean less than presidents of the United States have often implied that it means. Japan and Europe remain dependent on Middle East oil and it is hard to believe that we could ever allow a situation to materialize where there was a vast difference in price between the price of oil in Japan and Europe and the price in the United States. And so if one asks the fundamental question is the world price of oil vulnerable to what happens in the Middle East the answer to that question is probably somewhat less than it was but it is still very vulnerable to what happens in the Middle East. And in that sense even if the United States stops being a net importer of oil it will still be very vulnerable and can’t really be said to be energy independent.

 

 

 

The acclaimed economist talks oil prices, energy independence, and America's unavoidable market vulnerability. Even though the United States is reeling in its reliance on foreign sources of oil, Summers says its link to the oil markets of Europe and Japan means an innate state of vulnerability.

Related Articles
Playlists
Keep reading Show less

Five foods that increase your psychological well-being

These five main food groups are important for your brain's health and likely to boost the production of feel-good chemicals.

Mind & Brain

We all know eating “healthy” food is good for our physical health and can decrease our risk of developing diabetes, cancer, obesity and heart disease. What is not as well known is that eating healthy food is also good for our mental health and can decrease our risk of depression and anxiety.

Keep reading Show less

For the 99%, the lines are getting blurry

Infographics show the classes and anxieties in the supposedly classless U.S. economy.

What is the middle class now, anyway? (JEWEL SAMAD/AFP/Getty Images)
Politics & Current Affairs

For those of us who follow politics, we’re used to commentators referring to the President’s low approval rating as a surprise given the U.S.'s “booming” economy. This seeming disconnect, however, should really prompt us to reconsider the measurements by which we assess the health of an economy. With a robust U.S. stock market and GDP and low unemployment figures, it’s easy to see why some think all is well. But looking at real U.S. wages, which have remained stagnant—and have, thus, in effect gone down given rising costs from inflation—a very different picture emerges. For the 1%, the economy is booming. For the rest of us, it’s hard to even know where we stand. A recent study by Porch (a home-improvement company) of blue-collar vs. white-collar workers shows how traditional categories are becoming less distinct—the study references "new-collar" workers, who require technical certifications but not college degrees. And a set of recent infographics from CreditLoan capturing the thoughts of America’s middle class as defined by the Pew Research Center shows how confused we are.

Keep reading Show less