America’s booming oil industry could help push oil prices lower over the next few years, and some analysts claim $50 per barrel oil is a possibility.
CNN Money reports that analysts at Bank of America Merrill Lynch expect U.S. oil prices to average about $90 per barrel over the next two years, but prices could sink to the $50 level at some point during that time frame. The Merrill analysts also said global oil prices, which more closely dictate the price of gasoline in the United States, are expected to remain high as growth in global oil supplies lags population growth and economic output.
The drop in U.S. oil prices would likely be temporary, CNN Money reports, caused by the difficulty in moving huge amounts of new oil from places like North Dakota’s Bakken shale or Texas’ Eagle Ford to market. New production from those areas has already led to a glut of oil in the region.
“No one expected output to grow by a million barrels per day last year,” Francisco Blanche, Merrill’s head of commodity research, said in a press briefing in New York. “No one.”
As a result, CNN Money reports, oil has been accumulating in Cushing, Okla. – home to the convergence of several pipelines and dozens of oil storage tankers that act as the delivery point for the most commonly quoted U.S. oil price, West Texas Intermediate.
Some independent oil price analysts expect U.S. crude oil prices to fall $10 per barrel during the first quarter of 2013, leaving prices in the mid-$70s.
Crude oil traded Wednesday at $86.80 per barrel in New York, up $.01 per barrel from the previous day. Brent crude traded in London at $109.67 per barrel, a gain of $1.66 per barrel on Wednesday.
Gasoline and diesel prices continued moving lower this week, according to the Energy Information Administration. The average price for unleaded gasoline in the U.S. was reported at $3.45 per gallon, down 4.5 cents from the previous week. Average U.S. diesel prices were $3.99 per gallon, down 3.6 cents per gallon from the previous week.
Given the relatively gloomy outlook for oil prices in the U.S., Blanche suggested the U.S. government may have to approve exports of West Texas Intermediate if it wants the oil boom to continue, as $50 a barrel is below the cost of production.