Oil prices may decline in the short term on fears of a recession, but in the long term oil prices will remain elevated because of misguided government policies around the world
In the 1930s, Cambridge economist Nicholas Kaldor analyzed commodity prices and their behaviour over the business cycle, developing what’s known as the cobweb theorem,
That is, low prices in one period lead to a fall in supply and a subsequent rise in prices. If producers plan their investment expecting high prices, then supply in the second period will be higher. Prices will fall when producers try to sell all of their output. This process repeats itself, going from periods of low supply and high prices to high supply and low prices. When prices rise a lot, higher production is encouraged.
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