The bears that barged into the oil market and knocked crude prices down one-quarter from their summertime highs appear to be hunkering down for a lengthy stay. Big investment banks, including Goldman Sachs and Barclays, have just slashed their forecasts for next year's oil price. Energy analysts Wood MacKenzie said Tuesday that a sluggish economy could keep oil benchmark prices around $80 a barrel unless OPEC makes production cuts. That means the oil-price slump of the last four months may not be a bug, but a feature of frothy, oversupplied markets.
That's clearly not good news for some spendthrift oil producers, especially Iraq, Iran, Russia, and Venezuela, whose distorted economies require ever-higher oil prices to balance the budget. But a looming question is how a prolonged drop in oil prices will affect their better-off brethren, especially the rich petrostates of the Persian Gulf.
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