The paper argues that the international oil market has recently experienced fundamental changes which could well result in a significant discontinuity leading to much lower prices and consequent instability, The paper develops an analytical framework to explain how oil prices are determined, It then considers the future prospects for the various factors and driving forces which will influence future price. It outlines in what way the oil market environment has altered and then considers two consequences of this new environment - the volatility of oil prices and their absolute level.