Real Oil Price Falls 13.6% Compared to Last March

In real dollars, the price of oil averaged $93.05 in March 2013. This was 13.6% lower than the real price of oil in March 2012. The month-over-month change in the price of oil has contracted nine of the last 12 months. And, the rate of contraction in March was the fastest since June 2012. Annually, the price of oil has contracted faster each of the last five months. The current annual rate of contraction, now -7.1%, is the fastest since April 2010.

Oil is a world commodity. So, there are a number of factors that affect its price. But, two significant factors are the relative strength of the dollar and real consumer spending. The dollar has been strengthening against most currencies, which is pushing the dollar price of oil down. Real consumer spending has been growing at a constant rate, which is generally a sign of slower growth or faster contraction in oil prices. However, real consumer spending has been growing faster recently. This would indicate an increase in the price of oil, all other things being equal. 

We use the price of oil to forecast production of oil, gas field, and mining machinery.