Oil Prices Resist the World

In recent months, oil prices plunged as consumers curtailed fuel use around the world, with some analysts predicting that the dire economic situation would cause oil to fall to $20 a barrel or less.

But in a twist, oil prices have stabilized at close to $50 a barrel. While prices may have fallen by two-thirds since their peak last summer, oil remains expensive by historical standards.

The resilience shown by the oil markets is not because of any improvement in the global economy or rise in oil consumption. Global demand remains on course for its steepest drop since the early 1980s, and oil inventories are at their highest levels in 19 years.

Instead, analysts said, oil is once again being sought by investors as a refuge against a slumping dollar and rising inflation. Stabilization of the oil price is also a victory for the OPEC cartel, which has succeeded in cutting output sharply to match lower demand.

NY Times