We have mentioned a few times before that the oil market continues to be both super important on its own and also, a great bellwether to follow. The price of crude is a great signal for the direction of the global economy, the battle with inflation, the direction of the Russian war in Ukraine and many other things besides.

Thus, oil remains both critical on its own and a key asset price to watch.

• Well, the biggest news in global oil markets has been the steadily declining price of the stuff.

This past week the price of oil in the "Brent crude" benchmark from the North Sea near Europe dropped below its price at the start of the year (~$77). The American benchmarks are even cheaper (~$71).

​Add it all up and the oil price is now negative for the year and has come down 20% in the last month and 10% over the last week or so. The entire increase post-Ukraine invasion has been erased and then some.

This is great news.

It is also the rarest of 2022 developments: a positive surprise.

As this newsletter has argued constantly, a high oil price creates two problems:

1. It keeps inflation high and most importantly, hurts regular (and especially poor) people all over the globe. Being energy insecure is a huge problem for a lot of the developed and developing world at present.

2. It effectively traps the Federal Reserve and other central banks. Raising and lowering interest rates does nothing for oil supply. They can, indirectly, get the oil price down by lowering oil demand.

We wrote about this here and here, if you are interested.

So, the fact that oil has, with some interruptions, declined pretty steadily from June-ish has been a very welcome development.

It is also a trend with multiple benefits: more wiggle room in the household budgets, cheaper inputs for businesses, more flexibility for central bankers and policymakers and, perhaps best of all, fewer funds for Vladimir Putin's war machine.

It might even make the anti-oil environmentalists happy! Cheaper oil prices (if they last, mind) make it far less attractive to find, develop and exploit new oil fields.

We explore some of the possible answers for "why are oil prices decline" in the next section but regardless of the precise reason, the current decline is tremendously welcome.

It also raises quite a few important questions:

• As for stocks, increasingly the same for the oil outlook?

• Or, will 2023 see a further steep market decline or will there finally be a significant rebound?

This newsletter has previously worried about another spike, especially in European energy prices this winter but instead, so far, we have gone the very opposite.

It is a classic case of investors worrying about the wrong thing, in exactly the wrong place. This could reverse in the weeks and months ahead but for now, this is both a very positive and very significant development.

It is a classic case of investors worrying about the wrong thing, in exactly the wrong place. This could reverse in the weeks and months ahead but for now, this is both a very positive and very significant development.

That matters. Cheaper oil is meaningful for businesses around the world and cheaper gasoline, diesel, natural gas, heating oil and plenty of other derivatives are important for consumers, rich and poor, the world over.

As to why this decline is occurring, let us explore some of the possible answers....

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