Oil prices have fallen sharply in the past two months, with Brent crude sinking to $97 a barrel and West Texas Intermediate hitting $83. The explanation is simple: Since March, the world has been producing more oil than it’s consuming, according to data gathered by the Energy Intelligence Group. Global oil consumption has been declining since the end of 2011, falling to 88.5 million barrels per day at the end of April, from 90.4 million barrels per day in late December 2011. At the same time, world oil production has risen steadily for more than a year, driven by new finds and drilling techniques in North America and a 10 percent increase in production from OPEC during the past 12 months. The last time supply outstripped demand was in 2006.
The U.S. is now sitting on more oil supplies than it has since 1990. And yet our demand for it is at close to a 15-year low—a result of economic weakness and increased energy efficiency. “The amount of oil it takes to move the economy is declining,” says Fadel Gheit, an energy analyst at Oppenheimer.
