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Oil Boom: Things Are Looking Up For Consumers As Prices Drop

Welcome to the global oil boom.

Energy experts with the U.S. Energy Information Administration are predicting that oil prices will average below $60 per barrel this year, substantially below what analysts predicted last month.

EIA “forecast Brent crude oil price averages $58/bbl in 2015, $11/bbl lower than projected” last month, adding that it expects “WTI crude oil prices to average $55/bbl in 2015, $8/bbl lower than” December.

“Brent prices will reach a 2015 monthly average low of $49/bbl in January and February, and then increase through the remainder of the year to average $67/bbl during the fourth quarter,” EIA says. “The monthly average WTI crude oil spot price fell from an average of $76/bbl in November to $59/bbl in December.”

Despite the optimistically low oil prices, EIA does warn that there is “high uncertainty in the price outlook.” The energy agency says that “declines in oil prices and associated increase in oil price volatility continue to contribute to a particularly uncertain forecasting environment, and several factors could cause oil prices to deviate significantly from current projections.”

One major factor that could raise oil prices is a decision by OPEC member states to reduce output. Last year, the global oil cartel announced it would not cut output, but individual members could opt to cut production to boost prices.

Iran and Venezuela, for example, have pled with OPEC to announce production cuts to boost oil prices. Their governments rely heavily on oil revenues to fund their activities. Venezuela’s President Nicolas Maduro says he’s building a “new consensus” on oil production cuts.

“We’re building a new consensus for this new situation in the oil market, for the stabilization of the market and prices,” Maduro said.

Iran has also warned that OPEC would regret its decision to cut production. Iran supposedly needs oil at $72 per barrel to fund its budget, though the country’s oil minister said Iran could take lower oil prices.

Minister Bijan Namdar Zanganeh reportedly said “if the oil price goes down to $25 a barrel, the oil industry will not be threatened.”

“There’s a push from Venezuela for a cut, this is what they argued in Vienna and this is what they are lobbying for now. But from what I see there is no sign of cutting production from the Gulf states,” an OPEC delegate told Reuters. “The only solution is to have the market absorb this surplus and the extent of that will be assessed by OPEC by ministers during their meeting in June.”

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