According to the Italian oil group Eni, we may see oil at USD 200 a barrel in 4 or 5 years time. The reason, according to them, is because OPEC is refusing to cut production now, while oil prices are off their historical highs of over USD 100, and far from their close-to USD 150 of a few years back.
OPEC for their part say that even if they cut production, other producers will simply move in to supply the slack, and OPEC will lose market share, which they are loathe to do.
People seem to have long forgotten the days of USD 10 a barrel for oil 🙂
The current effects of the lower price are to put pressure on high-cost producers, especially non-conventional products like shale oil (fracking), as well as discouraging investments in non-conventionals and alternatives like wind and solar. However the low prices are hurting producers in different ways… from Russia to Iran to Saudi Arabia and other Gulf states, who have come to rely on a high oil prices to balance their national budgets.
Here’s the numbers (image dates from November 2014, price is under USD 50 now)
On the plus side, the lower prices are good for consumers and uncomfortable for producers who are always quick to increase prices when the price of oil goes up, but full of excuses as to why they can’t reduce their prices now.
The clever economists are also worried about deflation, which judging by the stories in the media, is an even worse problem than inflation and Must Be Avoided At All Costs … we don’t care if you are struggling, the alternatives are WORSE….. 🙂