Editor’s note: This post is part of a six-piece story on the U.S. economy, the upcoming presidential election, regulatory drag and all the impact all three are having on the trucking industry. Click here to read from the beginning.
“I think history doesn’t tell us very much,” Glassman says of predicting oil prices, noting previous drops in oil prices have been offset with various spikes at different times. “This one, seems to me, is very demand and supply driven.”
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Click the links below to read more on the discussions of the U.S. economy’s health that took place at TRALA this week: Are we slowing our own economic growth? How long will sub-$100 per barrel oil last? Are winds of change blowing in Washington? What can and should get done before the next election? [/gttable] |
The U.S. has managed to extract oil and gas from places where historically it was extremely difficult, if not impossible, to do it in an efficient way. That’s helped drive down, and keep down, crude oil prices.
“We’ve brought such a mass of new oil to the market, it’s really had an affect on the prices,” says Rayola Dougher, American Petroleum Institute (API). Dougher says last October, prices were expected to hit $150 per barrel around this time, which would equate to roughly $5 per gallon at the pump. Diesel is now projected down to $2.83 this year, she says, and around $3.25 in 2016.
To combat the supply glut, Glassman says the Saudis have dropped oil prices in an effort to force U.S. production out of business, and also in an effort to push Iran and other middle eastern competitors out of the market.
Eventually, as the Saudis seize more marketshare, prices will rise. However, Glassman says waning demand and ample supply should keep prices hampered.
“Even as demand comes back, the supply will be there,” he says. “We’ve got so much oil we don’t even know where to put it.”
“We’re awash in inventories right now,” Dougher adds. “We’re around 70 percent full right now.”
As recently as 2008, up to 60 percent of the oil used in the U.S. was imported, but that has dropped down to 23 percent now.
If and when the U.S. can realize the full potential of the Keystone Pipeline, Dougher says North America could practically sustain itself with domestically produced oil.
Dougher says the next big push will be for the U.S. to export its oil, which she says would create 300,000 jobs in the U.S. while reducing the country’s trade deficit significantly.
