Will the falling oil price mean austerity for Malaysia?


The recent decline of the oil price – and therefore an increase in oil price volatility – have created a particularly uncertain forecasting environment that cannot be overlooked when attempting to forecast the economic outlook for 2015.

With the oil price falling more than 40% since June from US$115 a barrel to, as of press time, below US$70 a barrel, the US Energy Information Agency (EIA) again cut its crude price forecasts for 2015 after the Organization of Petroleum Exporting Countries' (Opec) decision last month to maintain its production ceiling. The agency trimmed its Brent crude estimate for 2015 to an average price of US$68.08 per barrel. If the 2015 oil price remains at its current low levels of less than US$60 a barrel, Malaysia would face a worst-case scenario in its economic projections.

But why is the oil price falling after nearly five years of stability?

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