Effects on the Metals Industries of the Decrease in Oil Prices: A Preliminary Analytical Survey∗

Abstract

The recent decrease in oil prices should benefit metals producers by reducing costs of production—through lower energy prices—and increasing the demand for metals— through income and substitution effects. It is difficult, however, to predict a substantial return to the earlier relative role of metals: Real energy prices are still well above their levels of 20 years ago; the duration and extent of the oil price decrease is highly uncertain; petroleum generally is not a very important energy input in metal production; other energy prices probably will not decline as much as oil prices; and the effects of the oil price decrease on currency exchange rates and inflation rates are complex and difficult to predict in general and for individual countries.