Lower oil prices could possibly mean cheaper groceries and gold while a Texas congressman speaks out in support of ending the export ban and the Energy Information Administration predicts oil prices to drop to $62.75 a barrel in 2015.
In the midst of a bear market, oil has dropped to a five year low as both Brent and WTI fell 18% in the month of November. Investors have added nearly $100 million into large exchange-traded funds that follow oil prices in the first four days of December in hopes of a market recovery despite dismal oil prices and projections. “People might consider it a buying opportunity but we still have an over-supplied market. New Lows will be tested. We are in for a volatile market,” said Tom Finlon from Energy Analytics Group LLC.
Following recent debate over ending the crude export ban, Texas congressman, Joe Barton, has recently introduced a new two page bill that would set a new national policy in crude oil trade while repealing the 39-year old ban. As oil prices continue to plummet, some experts believe that discontinuing the export ban will prove beneficial to oil companies that are losing profit along with the greater economy on a global scale. “The U.S. has long been committed to free trade and open markets. It’s time we practice what we preach when it comes to energy,” said Barton.
According to Societe Generale SA and Citigroup Inc., low oil prices could be impacting other sectors such as the food, mining, and cotton industry. Since energy makes up half the production costs of food and metals, cheap oil prices are leading to inventory surpluses and lower prices in groceries and a decline in the value of gold. “If the decline in oil prices is sustained, or oil prices are even lower in the future, that will relieve a lot of pressure from agriculture,” said John Baffes, a senior economist at the World Bank.
In light of OPEC’s decision to maintain energy output quotas, the U.S. Energy Information Administration has reduced it’s price forecast for oil to $62.75 a barrel 2015. Production is expected to rise to 9.32 million barrels a day in the next year and experts argue that continuing low oil prices will inevitably leave certain drilling practices to be become less profitable. “U.S. oil production growth is expected to slow next year in response to lower crude process, but annual output is forecast to still increase to the highest level since 1972,” said Adam Sieminski, an EIA administrator.