M-RCBG Senior Fellow-Led Study Group: Rabah Arezki
Session 1: February 5, 4:00-5:30, M-RCBG Conference Room, B-503
Sessions 2 & 3: February 27, M-RCBG Conference Room, B-503
Part I 11:30am-1:00pm
Part II 1:30pm-3:00pm
Overview
This Study Group will provide answers to questions about the "new normal" for the oil market and its interplay with the global economy in the aftermath of the price collapse that started in June 2014.
These dramatic (and largely unexpected) developments have sparked intense debates over the causes and consequences of the collapse in prices. Arguably, the oil market has changed structurally and the dynamic adjustment to lower oil prices is now quite different from the past. Specifically, the advent of hydraulic fracturing combined with horizontal drilling has led to the advent of so-called “shale oil” that changed the dynamic of the oil market. Indeed, shale oil will lead to shorter and more limited oil-price cycles. The rapid increase in the production of shale oil—to the tune of 5 million barrels a day (mbd) in a market of 94 mbd—has also arguably contributed to the oil supply glut that led to the collapse in oil prices (Arezki and Blanchard, 2014).
Although the price collapse led to a massive cut in oil investment, production was slow to respond, keeping supply in excess. The resilience of shale production to lower prices surprised market participants, leading to even lower prices in 2015. Shale drillers significantly cut costs by improving efficiency, allowing major players to avoid bankruptcy. Shale oil production and the uncertainty surrounding its potential and resilience will define the dynamics of the oil market for years to come.
In the long run, a broader energy perspective is needed to comprehend the future of oil. The manner in which falling oil prices affect the global economy has also changed importantly.
Session 2: The Macroeconomics of Resource-Rich Countries
Synopsis: the study group will build on frontier academic and policy research to explore the macroeconomic consequences of boom and bust cycles in resource rich countries. It will also discuss policy options to address these challenges and ways for these economy to transform.
View Rabah Arezki's books on the topic
Session 1: Rethinking the Recent Oil Price Collapse
This presentation will answer 7 questions ranging from the drivers of the oil price collapse, the economic consequences of the collapse in oil prices, to the future of the oil market.
Rabah Arezki is Chief of the Commodities and Environment Unit in the IMF Research Department and is also a non-resident fellow at the Brookings Institution and an external research associate at the University of Oxford. He received his M.S. in statistics and economics from the Ecole Nationale de la Statistique et de l’Administration Economique in Paris and Ph.D. in economics from European University Institute, Florence. He has written on energy, commodities, international macroeconomics, and development economics. He has published widely in academic journals including the Quarterly Journal of Economics, the Economic Journal, the Journal of International Economics, the Journal of Development Economics, the European Economic Review, Economic Policy, the Journal of International Money and Finance, the World Bank Economic Review, and the American Journal of Agricultural Economics. He is the Editor of the IMF Research Bulletin and an Associate Editor of the Revue d'économie du développement. He has co-edited special issues of academic journals including of the Journal of Money Credit and Banking, the Journal of International Money and Finance, and Oxford Economics Papers. He is the co-author, and co-editor of several books including Beyond the Curse: Policies to Harness the Power of Natural Resources, Commodity Price Volatility and Inclusive Growth in Low-Income Countries, Shifting Commodities Markets in a Globalized World, and Energy Transition and the Post-COP21 Agenda. Many of his research papers have been cited extensively in academic circles and in prominent media outlets such as the Economist, the Financial Times, the New York Times, the Wall Street Journal, Project Syndicate, and the Washington Post. His blog posts including on the recent oil price collapse and its global economic consequences have been viewed over hundred thousand times and have been listed as the most read IMF blog posts three years in a row. He is also a frequent contributor to Finance and Development magazine and VoxEU. As a Senior Fellow, his research is entitled The Economics of Sustainability: Causes and Consequences of Energy Market Transformation. His faculty sponsor is William Hogan, Raymond Plank Professor of Global Energy Policy at Harvard Kennedy School. Email: rabah_arezki@hks.harvard.edu