Oil prices have fallen by nearly 60 per cent since June, with the cost of Brent crude fluctuating between $45 and $49 a barrel and some UK garages reducing their petrol prices to 99p a litre – the first time this has happened in six years.
However, the secretary-general of OPEC, Abdulla al-Badri, last week stated that oil prices have now ‘reached the bottom’ and could soon begin to increase again.
But have oil prices fallen as far as they can?
Credit Johnny Overpants on Flickr http://bit.ly/1yFYvpn
Credit Johnny Overpants on Flickr http://bit.ly/1yFYvpn
The price of oil has fallen into rapid decline largely as a result of the rise of fracking and gas extraction in the United States, pushing American oil production to its highest level in 30 years.
The Organisation of Petroleum Exporting Countries (OPEC) would ordinarily cut production when supply levels are so high, but has taken the unusual decision of not cutting output for fear of losing market share to its rivals, particularly America.
However, there are signs that US output may have begun to slow.
Data released on Monday showed that the demand to lease oil rigs has curtailed in America – suggesting producers may soon cut production.
Credit Neil Sequeira Flickr: http://bit.ly/13ltCxl
Credit Neil Sequeira Flickr: http://bit.ly/13ltCxl
This pushed the price of Brent crude up $53.65, up 1.3 per cent, while US oil rose to nearly $49, up 1.7 per cent.
All of which has led many to speculate that we will now see a rebound in oil prices.
However, there are others, such as prominent motoring journalist Quentin Wilson, who believe the price of oil could drop to $40 a barrel – and petrol prices to 85p a litre.
While the Petrol Retailers Association’s Brian Madderson has stated that it is ‘entirely possible’ that petrol stations across the country will begin selling petrol at £1 a litre.
BP has also just reported low profits as a result of falling oil prices, while the world’s largest publicly-traded oil company, ExxonMobil, has reported a 21 per cent fall in profits.
No one can say for sure what will happen to oil prices, but it is safe to say that we have not seen the end of the saga yet.
