Why fuel prices will stay low for the next decade
"You have to believe that there is a possibility that you will not necessarily go back above $100, you know, ever," Ian Taylor, Chief Executive Officer of Vitol Group BV, told Bloomberg. His company is the world's largest independent oil trader. Instead of any significant increase or decrease, the exec believes crude could hit $45 to $50 a barrel in the latter half of 2016 and hover around $50 for the next decade. Prices would fluctuate about $10 in either direction over those years.
The key to these sustained lower prices is that oil production in US shale fields, Canadian tar sands, and other parts of the world remove some of OPEC's power to set prices. Plus, reduced sanctions on Iran further add to the global supply. "It's hard to see a dramatic price increase," Taylor said to Bloomberg. OPEC's own numbers back up Taylor's prediction. A 2015 study from OPEC countries forecasted crude to be between $40 and $76 a barrel in 2025.
One thing that might boost oil prices is if OPEC convinces other countries to reduce production, and Taylor thinks there's a chance that could happen. "It's probably slightly against, 60-40 against, but it's a real possibility," he told Bloomberg.
Cheap oil continues to benefit American drivers at the gas pump. The AAA Daily Fuel Gauge Report puts the current national average at $1.739, which is down 44 cents from the same day last year. Oklahoma has the lowest state average at $1.42 a gallon. Low fuel prices have also spurred new car sales, especially trucks, crossovers and SUVs.
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