Mr Weeze

2.55 if we're still keeping score. With the most recent round of oil price forecasts I would expect prices to stay low through to at least March next year.

Pulaski

Based on some of the forecasts I've read, prices could come down another 30¢ - 50¢, but whether they come down any more or not, I don't see them rising much for a number of years.

I recall reading a few years ago that the medium to long time projection for the price of oil was that it would fall and remain low because vehicles were becoming more efficient, more people around the world are moving to cities and using public transport, and that short term high oil prices had kick-started the development of numerous alternative and/or renewable energy sources. That report was, it now appears, remarkably prescient.

Mr Weeze

I wouldn't be confident in any multi-year prediction. I have pulled together a macro-view on oil pricing for work, and the range even for next year is astonishing. Goldman Sachs went from saying no change on 3rd Oct to cutting $15 from their 1Q15 forecasts by 27th Oct. Barclays have cut twice in a month. However Standard Chartered (the team largely credited with spotting the last major rise in oil prices) still forecast an FY15 price of $105.

Pulaski

With weak/ falling demand, increasing supply, and a boom in alternative energy, I can't imagine what Standard Chartered analysts are thinking. :confused

I also trust my own analysis too. ..... About ten-eleven years ago a bank loan officer tried to sell me a fixed rate loan, "because rates were likely to rise". I thanked him and told him that I didn't think rates were going anywhere anytime soon. The mortgage rate at that time was about 6%-6¼%. For all but a few months of the years since then, rates have been lower, and for half that time a LOT lower.

scrubbedexpat099

Oil is not just used by cars. Population increases, increase consumption per person, reducing supplies, political unrest......

phodg

$3.17 in the North burbs of Chicago. Haven't seen it that cheap for a long time.

SultanOfSwing

Go a little farther north - it was $3.03 at the 7/Eleven on the way into work. The same one it was $2.92 at last week, though ...

Pulaski

Well supplies manifestly aren't reducing: Iraq and Libya are slowly coming back "on line", and reserves and production in Venezuela have ramped up dramatically. But the real game-changers are shale oil and tar sands in North America. Thanks to shale oil, and reduced consumption, the US will be self sufficient in oil by, IIRC, 2016.

The "political unrest" in the Middle East was completely debunked in a recent report, given that there has been almost continued war in the Persian Gulf region since the Iranian revolution more than 35 years ago and yet there has never been an interruption to the flow of oil.

hungryhorace

The current low balling of oil pricing by OPEC is in direct response to the US's improved ability to pump millions of barrels of oil daily, themselves. The price dropping below $80 a barrel is an (apparently 'short term') ploy to undercut the (very) expensive American means of oil production (fracking). Essentially ensuring OPEC remains relevant long term.

Incidentally the falling oil price has all but killed the UK's dreams of attracting (and heavily taxing) oil companies to frack, as it's simply not economical to do so when OPEC is turning out millions of barrels a day at sub $80.

hungryhorace

We're down to $3.01 at our local Hess here outside of Boston.

SultanOfSwing

I suspect we'll be back down around $3.00 or below within the next week or so.

I hate the way the BP garage on my way in and out of work has their 'price with wash' as the biggest. I see a huge $2.93 in the morning and then have to remind myself that it's really $3.13, and my car doesn't actually need washing.

Pulaski

But curiously in another article published earlier this year (that I cited recently in another post on BE) stated that Saudi Arabia cannot continue to exist long term with the price at less than $100/barrel because of the amounts they are needing to spend on social programs and infrastructure to stop their own people from revolting. In other words, low oil prices will either bankruptcy Saudi Arabia or cause a revolution. ...... which, in the light of the "debunking" I cited above of the rationale for the "risk premium", that the long-overdue elimination of the risk premium for oil because of (the bogus issue of) instability in the Middle East might actually cause instability and lead to an interruption to a significant amount of oil production.

hungryhorace

Hence my 'short term' comment. How long sub $100 barrels of oil are sustainable for OPEC nations is not yet clear. I think it will be a case of only time will tell.

Mr Weeze

So that leads to either prices not rising or having to rise

The price of oil has been disrupted as a result of the shale oil boom - neither alternative nor renewable. Oil consumption has continued to grow, but slower than supply. Plenty of shale is sustainable at prices lower than today. Canadian Oil sands are the most cost-intensive, and it is the marginal barrel that will be cut first. While Saudi may need Brent above $94 (based on what I have seen, but that is a guess) they are also sitting on a huge surplus and can weather any storm for MUCH longer than the rest of OPEC. Russia, on the other hand...

Pulaski

The point is that Saudi is no longer the 800lb gorilla in the room, the room now has about half a dozen 100lb chimps. With Russia, the massive increase in Venezuelan reserves, shale oil, and commercial production from tar sands, plans for commercial drilling in the Arctic, and that's only factors related to the supply of oil, Saudi is no longer able to determine the supply and price of oil more or less unilaterally.