Will Oil Prices Remain Low?

Every year many of our customers wrestle with this issue. Should they lock in before prices rise in the winter? Should they wait and see what prices do in the fall, and perhaps lock in then? Should they pass on the opportunity to enter into a fixed rate contract and hope to “ride the market down?”

At Jamie Oil, we generally avoid making projections about the future of oil prices. We also believe the decision of locking in or not locking in is an issue consumers can best navigate based on their own budgets and other financial considerations that are specific to their situation. As always, if any customer needs help, please give us a call.

That said, a few noteworthy events are happening in the worldwide oil markets that could influence oil prices for the better as far as consumers are concerned. First, the Organization of Petroleum Exporting Countries (OPEC) has lost their clout. The cause of gasoline shortages in the 1970’s and the bane of Jimmy Carter’s years in Washington, the twelve nation cartel has too much competition to control oil production and prices worldwide. OPEC got greedy and now they are paying for it. The second factor is the strong US dollar. When compared to other currencies, the dollar buys more goods than it did five or seven years ago. Since oil is priced in dollars per barrel in international markets, a strong dollar makes for better purchasing power for American consumers. A strong dollar lowers oil prices everywhere.

Perhaps most significant is the “shale boom” right here in the US. With domestic crude production near four million barrels a day and vast reserves currently available in the US and in Canada, the supply picture has changed. If OPEC seeks to increase prices, look for more North American wells to begin pumping.

Just as real estate, the stock market and interest rates cycle through their ups and downs, it appears that the oil markets have cooled off after a ten year period that saw prices rise to levels never seen before. History teaches us that it is not uncommon to have innovative suppliers who employ technology to pop the balloon of those who once controlled the market. OPEC is no longer in charge. The result is a better value for the consumer. Oil heat is expected to be more financially competitive with other sources of heat over the next five years.