The second week of October 2014 saw the U.S. oil prices sink to a trough. That did not raise too many eyebrows, though, since the plummeting tendency has been growing in strength during the recent months. On October 12 customers filling up gas were charged $3.20 per gallon, the lowest price since 2010. The events are expected to continue in this way, according to Gas Buddy’s own chief analyst Tom Kloza, who predicts a continued decline in the price of gas based on the market being oversaturated and demand being slack.
The average price quote for unleaded gas was $3.29 and $3.40 in the beginning of October and mid-September, respectively. The further development is most likely to be a continued decrease of the unleaded gas price below $3 per gallon.
West Texas Intermediate blend, alongside with Brent oil, sank by over 4 percent as Columbus Day celebrations were in full swing on Monday, October 12. This steady drop can be accounted for by a combination of factors such as increased supply by OPEC growing contribution coupled with U.S. shale yield, as well as the early 2014 expectations of the International Energy Agency for demand to go determinedly down over the period of 2014 and 2015. To give a better idea of what may be expected, Brent crude barrel price is said to continue to drop down to $85.04 during the next month; U.S. crude is predicted to hit the bottom limit of $81.84 per barrel.
As expected, there is little unanimity in the approach to tackling oil pricing drops among the industry’s leaders. Saudi Arabia appears to accept the per barrel quoted price decline to $80, whilst in Kuwait they are officially prepared to sustain a price decrease all the way down to $76 a barrel. The way that the business’s experts see it, according to Simmons & Company investment bank head of research Jeff A. Dietert, Saudi Arabia strategists are attempting to keep some space for manoeuvres in order to stabilize their market share, albeit facing a distinct probability of the need to deviate from their previous strategy that consisted in sticking to $100-something per barrel price for Brent.
As oil companies’ earnings take a nosedive, some actors might actually benefit from the current state of affairs. Consider common motorists at gas stations throughout U.S.; they will surely enjoy the low prices when filling up their gas tanks. This will eventually result in more spending money being available for the upcoming holidays and everyday shopping. It looks like the U.S. economy will not suffer from the impact of the trough in the oil business, and the reason for that one is that the consumers will pump that money back into the country’s economy, generating growth in other sectors of country’s economy like travel and retail.