Oil's Wild Decades: From the 2014 Crash to the 2022 Spike (Brent vs WTI)

If you were paying attention to the oil markets from 2014-2022, you’d remember that prices dropped over 50%, occasionally went below $0, and then increased by more than 300%, all in a little over 8 years. Very few assets have experienced waves of volatility like this in any investment market.

For investors, workers from the energy industry, and anyone who is trying to learn how commodities actually work, this period is very informative for the long term. This period represents (1) a classic example of a supply glut; (2) a hundred-year demand shock; (3) geopolitical supply shock; and (4) the lesson of how quickly our current market can change.

This article will discuss what happened, why we saw each major move and why the Brent vs. WTI price difference matters.

Understanding Brent and WTI: Two Prices for the Same Basic Product

Before getting into the events themselves, it’s worth explaining why oil has two major benchmark prices. You’ll often see them quoted separately in financial news, and the difference between them contains useful information.

West Texas Intermediate (WTI) is the price that serves as a reference for crude oil sold within the United States and mainly exchanges in New York at the New York Mercantile Exchange. The oil itself is often stored and pumped from Cushing, Oklahoma, where, due to geography, if the tanks at that location become full, prices can dramatically decrease (or become less than $0) because purchasers do not have any physical location to hold onto the oil they have purchased.

Brent crude is the international reference price for crude oil produced around the world and is more commonly used throughout the world; Brent crude is named after a North Sea oil field and is traded out of London. Since Brent Will mainly be transported by sea and will most likely use global shipping routes, Brent is usually viewed to be a better indicator of what is occurring with the world’s oil supply and demand. For example, most oil sold internationally is typically priced according to Brent, even Canadian heavy crude blends sold on the global market.

Brent crude has been traditionally priced higher than WTI (typically by some amount like $1-5 per barrel, although the amount of the difference can change based on certain temporal and logistical factors). When a news article references the price of oil to be $80 a barrel, it is generally referring to Brent unless otherwise stated.

The 2014 Crash: When Supply Overwhelmed the Market

The oil price crash that began in mid-2014 was years in the making. When it arrived, it moved with a speed that surprised even experienced market participants.

Through 2011, 2012, and 2013, oil had traded in a relatively stable range above $100 per barrel. That sustained high-price environment had two effects. First, it attracted enormous capital investment into oil exploration and production around the world. Second, and more consequentially, it made the U.S. shale oil revolution economically viable.

Hydraulic fracturing, commonly called fracking, allowed producers to extract oil from shale rock formations that had previously been inaccessible. As technology improved and costs fell, U.S. oil production surged from roughly 5 million barrels per day in 2008 to nearly 9 million by mid-2014. The United States went from being a declining oil producer to one of the world’s largest in just a few years.

At the same time, demand growth from China, which had been one of the key drivers of high oil prices throughout the 2000s, began to slow as the Chinese economy matured.

More supply and softer demand caused prices to start to crack.

OPEC’s response was the critical wildcard. In November 2014, Saudi Arabia led the cartel in a decision not to cut production to defend prices, as OPEC had done in previous downturns. Instead, Saudi Arabia effectively chose to let prices fall with the goal of squeezing out higher-cost producers, particularly the U.S. shale industry, which needed higher prices to remain profitable.

The strategy worked in terms of causing pain, but the U.S. shale industry proved more resilient than expected. It cut costs dramatically, improved techniques, and survived lower prices longer than Saudi officials had anticipated.

Brent crude fell from around $115 per barrel in June 2014 to approximately $27 per barrel in January 2016. WTI followed a similar trajectory. Energy companies worldwide slashed capital budgets, laid off workers, and in some cases went bankrupt. Canadian oil sands projects, which have among the highest production costs in the world, were particularly hard hit.

The Recovery and Uneasy Balance: 2016 to 2019

Oil prices recovered gradually from their 2016 lows. OPEC eventually agreed to production cuts in late 2016, joined by Russia and other non-OPEC producers in the OPEC+ framework that has governed cartel strategy since. Demand growth remained steady as the global economy expanded.

Brent climbed back toward $80 per barrel by late 2018. U.S. shale production continued growing, acting as a natural ceiling on prices: whenever Brent moved meaningfully higher, more U.S. rigs activated and brought additional supply to market. Analysts described this dynamic as a “shale ceiling,” and it fundamentally changed how OPEC+ approached production decisions going forward.

April 2020: The Day Oil Went Negative

The COVID-19 pandemic delivered a demand shock to oil markets unlike anything in recorded history.

As lockdowns spread globally in March 2020, demand for transportation fuel collapsed almost overnight. Airlines grounded fleets. Road traffic fell sharply. Industrial activity slowed. Global oil consumption dropped by an estimated 20% to 30% in a matter of weeks, a volume of demand destruction that the market had no framework for.

At the same time, a price war broke out between Saudi Arabia and Russia in early March 2020. Negotiations over production cuts broke down, and Saudi Arabia actually increased production just as demand was evaporating. The combination was extraordinary: more supply arriving into a market where demand had collapsed.

Storage facilities around the world, particularly at Cushing in Oklahoma, filled to near capacity. Traders holding futures contracts for WTI crude, who would be required to take physical delivery of oil in May 2020, found themselves with nowhere to put it.

On April 20, 2020, the May WTI futures contract traded at negative $37 per barrel. This was not a glitch or a data error. Holders of the contract were effectively paying buyers to take delivery because the cost of finding storage had exceeded the value of the oil itself.

It was a moment without precedent. Brent crude did not go negative, in part because seaborne delivery has more flexibility than pipeline delivery to a landlocked hub, but Brent still fell to lows around $15 to $20 per barrel in April 2020.

The 2022 Spike: Geopolitics Reshapes Supply

By 2021, oil markets had recovered sharply as vaccines rolled out, economies reopened, and pent-up demand for travel and goods collided with supply chains and production capacity that hadn’t fully recovered from the 2020 collapse. Brent climbed back above $80 per barrel by late 2021.

Then Russia invaded Ukraine in February 2022.

Russia is one of the world’s largest oil exporters. Western sanctions, along with voluntary decisions by many companies to reduce Russian energy purchases, removed a meaningful volume of Russian crude from accessible markets. European countries that had depended heavily on Russian energy scrambled to find alternatives. The supply disruption was real, and markets priced it in quickly.

Brent crude surged to approximately $130 per barrel in March 2022, a level not seen since 2008. WTI followed to similar heights. Canadian oil producers, whose heavy crude is priced at a discount to Brent but moves broadly with it, saw revenues surge. The TSX energy sector was one of the best-performing corners of any major stock market globally in 2022.

The spike did not hold. High prices attracted additional supply from non-sanctioned producers. Demand in some regions softened as high fuel costs changed behavior. China’s COVID lockdowns through much of 2022 reduced its oil consumption. By late 2022 and into 2023, Brent had retreated to the $70 to $90 range, where it remained through much of 2023 and 2024.

What This Means Today

By 2026, oil markets carry the lessons of this eight-year cycle embedded in how traders and analysts approach them. The memory of negative prices in 2020 reinforced that oil demand can collapse in ways that seem impossible until they happen. The 2022 spike reinforced that geopolitics can override supply fundamentals quickly and without warning.

For investors, the key takeaway is that oil’s extreme volatility is structural, not temporary. Those who held through the 2014-2016 crash and the 2020 collapse without panic selling eventually recovered and in many cases profited significantly in 2021 and 2022. But that required a strong stomach and a long time horizon that not every investor has or needs.

Common Mistake to Avoid

Investors often make the mistake of thinking that today’s oil prices are fixed and projecting today’s pricing levels into the future. For example, when oil is $100 per barrel, it is usually assumed to be at that level moving forward; however, when oil is $40 per barrel, it is assumed it will also stay at that level.

Oil has a history of fluctuating much more than people expect during any given time frame, due to a multitude of unpredictable factors, including cartel agreements made in private, geopolitical events that happen without much warning, and demand surges driven by economic expansions and global issues such as pandemics.

Therefore, the assumption that oil will continue to trade at or near the current price is almost always a very unstable way to build an investment case in the oil sector.

Conclusion

The oil markets from 2014 to 2022 provide a case example of the extreme volatility in commodity prices throughout that period. Prices fell from $115 to $27 due to oversupply; due to the pandemic, prices temporarily went into negative territory; and an unexpected geopolitical event caused prices to exceed $130.

Each price shift has an identifiable cause which can be better understood with the above knowledge, so a more sophisticated understanding of the oil market can be achieved through these key concepts: 1) Brent vs WTI, 2) OPEC+ and its involvement in supply management; and 3) how demand shocks and geopolitical incidents impact prices.

While these concepts will not provide you with the ability to predict oil prices/changes, they will provide you with a greater appreciation/conceptual understanding of the underlying dynamics of the oil market when there is a price change.

Note: The purpose of this article is for educational/informational purposes only; it should not be construed as financial/investment advice. Given the inherent volatility and unpredictability in the oil market, you should always consult with a qualified investment professional before making any investment decision.

Frequently Asked Questions

What is the difference between Brent and WTI crude oil prices?

Brent crude serves as the global benchmark and is traded in London. It is delivered through seaborne tankers and reflects international supply and demand on a broad scale, making it the pricing standard for most of the world’s oil trade. In contrast, WTI, or West Texas Intermediate, is the benchmark for the U.S. market. It is stored and delivered at a landlocked hub in Cushing, Oklahoma. Generally, Brent prices tend to be a bit higher than WTI prices. The price of WTI can be more affected by storage limitations, which is a key reason why it briefly dropped into negative territory in April 2020 when storage facilities in Cushing were nearly full, while Brent prices remained positive.

Why did oil prices go negative in 2020?

The unusual situation in April 2020, where WTI prices fell below zero, stemmed from a combination of factors. The demand for oil plummeted due to COVID-19 lockdowns. At the same time, there was a temporary increase in production from Saudi Arabia and Russia following a price war. These circumstances led to storage facilities, particularly in the U.S., filling up quickly. Traders who held futures contracts due for delivery in May found themselves with no place to store the oil, so they were willing to pay buyers to take it away. This extraordinary convergence of events created a situation that had never been seen before in modern markets.

How does the 2014 oil crash compare to the 2020 oil price collapse?

Both events involved sharp declines in oil prices driven by supply and demand issues, but their causes were distinct. The crash in 2014 was largely due to an oversupply situation. U.S. shale production surged while demand growth slowed, and OPEC chose not to reduce their output. This decline unfolded over roughly 18 months. In contrast, the collapse in 2020 was primarily a result of a sudden shock in demand. Global lockdowns wiped out a significant portion of oil consumption almost overnight, coinciding with the price conflict between Saudi Arabia and Russia. The drop in 2020 was much quicker and, in many respects, more severe, reaching unprecedented levels, including negative prices that the market had never before encountered.

If you want to test this framework with your own numbers, use the interactive calculator and review the historical invest scenarios.