The dramatic drop in the price of crude oil has dominated headlines for the past several months. Even if one does not watch the news regularly, this decline was noticeable at the pump, as the related price of gasoline has plumbed lows not seen since the financial crisis.
This issue of Investment Focus examines some of the reasons given for the decline in crude prices and considers whether the decline stems from oversupply, diminishing demand or both - or other factors. The issue also examines how the U.S. dollar's value relative to other currencies may affect oil prices; the possible effect of lower oil prices on the U.S. shale industry; and the asset-allocation and asset-class implications of lower crude prices for investors. The issue concludes with a discussion of possible supply-and-demand scenarios for oil and the potential impacts of those situations on crude prices and the global economy. An appendix at the end of the issue provides a historical overview of crude prices.