average of Brent, Dubai and West Texas Intermediate oil prices, as reported in the World Bank’s Pink Sheet, fell by 30 percent or more over a six-month period: 1985-86, 1990-91, 1997-98, 2000-01, 2008-09, 2014-16, and 2020.<sup>5</sup> All but two of them (1985-86, 2014-16) were associated with global slowdowns or recessions as reported by Kose, Sugawara, and Terrones (2020). Most of these collapses were accompanied by weakening global growth, which contributed to the decline in oil prices, and were followed by slow recoveries. Several were accompanied or followed by financial market strains.

The March and April 2020 oil price collapses were the steepest one- and two-month collapses on record. Global oil demand collapsed as a result of the steepest global recession since the second world war as well as the wide-spread restrictions on transport and travel, which account for about two-thirds of global oil demand, to stem the spread of the COVID-19 pandemic (Wheeler et al. 2020). Meanwhile, a production agreement between OPEC and its partners, especially Russia, was delayed in early March before being concluded in mid-April with an agreement to historically large production cuts. These production cuts, however, still fell well short of the collapse in demand (World Bank 2020a, b). As a result, OECD petroleum inventories reached near-record highs. Once pandemic-related restrictions on economic activity were relaxed, oil prices rebounded quickly. Within three months, by June 2020, oil prices had recovered most of their losses and had returned to two-thirds of their pre-plunge levels.

# 2.2 Evolution of oil prices during oil price collapses

This section compares the seven episodes of price collapses against the pre-collapse price peak and the subsequent recovery. The collapse is identified as the earliest month in a string of months in which prices collapsed by more than 30 percent over a six-month period. The pre-collapse price peak (t=0) is defined as the month with the highest price in the twelve months preceding the month that identifies the price collapse.<sup>6</sup> The amplitude, duration and speed of the price collapse is defined by the pre-collapse price peak and the trough of the price in the collapse. The price recovery is the period in which prices reverse at least half their cumulative losses from the pre-collapse peak to their trough in the collapse. The pre-collapse runup is defined as the pre-collapse trough in prices to the pre-collapse price peak, in practice never more than a period of twelve months. Table 1 shows the amplitude, duration and speed of the price collapses, as well as their runups and recoveries, thus defined.<sup>7</sup>

> 5 The global economic developments around the collapses before 2020 are described in greater detail in Baffes et al. (2015); Baumeister and Kilian (2016); Kilic Celik, Kose, and Ohnsorge (2020); Kose and Ohnsorge (2019); Stocker et al. (2018); and World Bank (2018).

> 6 Pre-collapse peaks are defined as November 1985 (1986 episode), October 1990 (1991 episode), October 1997 (1998 episode), September 2000 (2001 episode), July 2008 (2009 episode), June 2014 (2014 episode), and December 2019 (2020 episodes).

> 7 The data is plotted in Supplemental Annex Figure 1.

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