Oil price will fall to $70 US a barrel in 2015, Goldman Sachs says
With recent declines in the prices of oil, it has left a lot of people wondering if this will be a trend. Goldman Sachs, one of the world's leading investment banks, speculates the benchmark price of North American oil is going to continue to decline to $70 by next spring.
If this prediction is in fact accurate, it will be the lowest price for North American oil since 2010. Currently, a barrel is prices just below $80, that is down from more than $100 a barrel only 4 months ago.
Earlier this year North America received a boom in shale oil and gas which drastically increased the amount of oil in circulation. Because there is so much in circulation, we are simply experiencing the effects of supply and demand - there's just more oil being produced now than the world needs.
Saudi Arabia could traditionally control the price of oil by limiting supply due to its status as the world's largest pumper of crude. "Goldman is saying a new oil order has arrived where the Saudis have decided to let the short-term oil price be low long enough to curb U.S. production in the shales," is how Judith Dwarkin, chief economist for the Ross Smith Energy Group in Calgary put it. Essentially, the Saudis may decide to drive down prices so much the U.S. production becomes unprofitable, then prices will soar.
I see many things scary about this. In the short term is seems great, cheap transportation means you can spend your money elsewhere. However, this will curb alternative energy product popularity for the time.
The Saudis may want the price to drop so low that the U.S. production is unprofitable, but many believe OPEC (Organization of the Petroleum Exporting Countries) will not allow the price to drop below $75.