Oil Price Drops 1.7% in January

In real dollars, the price of oil averaged $94.28 in January. This is the third month in a row that the real price of oil has fallen below $100. However, that trend is likely to end in February. Also, January was the first month that the real oil price was lower than it was one year ago since May 2013. But, with the average price of oil likely to be above $100 in February, the month-over-month rate of change should be positive again when the February data is released. Despite, the fall in the monthly price from one year ago, the annual rate of change continued to grow at an accelerating rate. Annually, the real oil price is growing at its fastest rate since June 2012.

Real consumer spending is a good leading indicator for the real oil price. Real consumer spending has been growing at a constant rate of 2.0% since May 2013. This is below the historical average rate of growth in real consumer spending. But, the recent trend in real consumer spending does indicate a rising price of oil in the near term. This is a positive sign for oil, gas field, and mining machinery production.