Economic Report 2013

3. Oil and Gas Markets

Oil Markets

Figure 1: Brent Oil Price, January 2008 to June 2013 (in money of the day)

Oil prices in 2012 were characterised by a short-term peak followed by an even shorter trough during the first half of the year and steadiness for the second half of the year. Overall, although world demand for oil edged upwards, with demand in OECD 1 countries falling and non-OECD rising, there has been notable consistency during the past two years in the price of Brent crude oil, the main ‘marker’ price in the Atlantic basin (see figure 1). The average price was $112 per barrel in 2012 (versus $111 in 2011), to the nearest whole numbers. However, if measured with greater precision, the difference between the two was even smaller: less than 50 cents per barrel. The maximum was $128 per barrel in March and the minimum $89 in June. Since the beginning of 2013, the price has fallen by about ten per cent and, in recent months, has largely oscillated in the range of $100 to $105 per barrel, but with a slight increase evident at the time of writing, in June and July, owing to renewed political turmoil in Egypt. Worth noting is the comparison of oil priced in dollars and pounds sterling which obviously reflects movements in exchange rates (see figure 2). In particular, the price of Brent in sterling has been largely constant over most of the past two years, apart from the brief excursions in March and June 2012 mentioned above, at a time when worldwide demand has been creeping steadily upwards (to an average of 90 million barrels per day (bpd) in 2012. For comparison, it was 80 million bpd in 2003).

160

140

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Brent Oil Price ($/bbl)

80

60

Brent Oil Price ($/bbl)

40

20

0

Jul 08

Jul 09

Jul 10

Jul 11

Jul 12

Jan 08

Jan 09

Jan 10

Jan 11

Jan 12

Jan 13 Mar 13 Source:EIA Source: EIA

Sep 08

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Sep 10

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Sep 12

Nov 08

Nov 09

Nov 10

Nov 11

Nov 12

Mar 08

Mar 09

Mar 10

Mar 11

Mar 12

May 08

May 09

May 10

May 11

May 12

May 13

Figure 2: Annual Brent Price since 1965, £/barrel versus $/barrel (inflation adjusted)

120

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Brent Price ($/bbl)

Brent Price (£/bbl)

80

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Oil Price Comparison (2012 Prices)

20

0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Source:EIA,BankofEngland Source: EIA, Bank Of England

1 The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world. Thirty-four countries are members of the organisation. More information can be found at: http://www.oecd.org

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ECONOMIC REPORT 2013