The credit crunch and international energy markets – what now?

Two years ago, oil prices were on their way up to the peak of $144 on 3 July 2008 – which was followed by a spectacular collapse to a low of $35.5 on 23 December. At the time of writing, they are now up again to about $85 – having been trading in an implicit band of around $70–80 for several months. Clearly, the most important driver of these extreme swings in the oil price has been the world economy – or more accurately, perceptions about the financial crisis and anticipations about the likely course of the ‘great recession’ and the recovery. This article takes stock of some of the lessons and, tentatively, tries to draw out implications for the, still very uncertain, future. It starts with a brief recap of the history of the great recession, focusing on the policy response. The next section looks forward at the domestic and international policy problems and the final section concludes with some general remarks about the interactions between global macroeconomic developments and the markets for oil and gas.