Low Gas Prices Expected To Continue As Crude Oil Drops To $58 A Barrel
ROBERT SIEGEL, HOST:
You know that big smile you've had on your face lately as you fill up your gas tank? Well, keep smiling. Oil prices have fallen again. U.S. crude settled below $58 a barrel today, a level not seen since the 2009 recession. NPR's John Ydstie has this report on the impact of those lower prices.
JOHN YDSTIE, BYLINE: There's been a good deal of handwringing about the rapid fall in oil prices. The stock market has suffered as shares of oil industry companies have been hit and companies like Stone Energy Corporation, based in Lafayette, Louisiana, are cutting back their plans for exploration and development. Stone Energy's Ken Beer says with prices at current levels, it's hard to justify more drilling.
KEN BEER: You know, your all-in cost might be 60 to 70 to 75 dollars, and so it doesn't make a whole lot of sense to continue to drill.
YDSTIE: But Beer says it does make sense to bring online oil you've already discovered and keep pumping from current wells.
BEER: Once you bring it on, the operating costs are virtually zero. So even at $60 oil, it doesn't make any sense not to produce.
YDSTIE: In fact, U.S. production will continue to climb next year, says Dan Katzenberg, senior oil analyst at Robert W Baird and Company.
DAN KATZENBERG: The momentum in drilling in the U.S. is so strong that it's impossible to see a decline in production in 2015.
YDSTIE: And if production does increase into next year, it will continue to put downward pressure on oil prices. U.S. crude could sink into the $40 a barrel range, says Katzenberg. And that would be a big boost to U.S. growth.
KATZENBERG: No question about it, this will be a boon for the economy. It's coming at the right time of year where you have Christmas and holiday shopping taking place, so there's more money in people's pockets. And it's likely gasoline continues to drop lower.
YDSTIE: This week Triple A put the average price of gas at $2.66 a gallon. The U.S. Energy Department predicts the average for next year will be $2.60 a gallon, which would save drivers a hundred-billion dollars over the course of the year. Europe and big oil consuming countries like India, Japan and China will also be helped. But Katzenberg says for some big oil producers, it's a different story.
KATZENBERG: You're very likely to see much more instability as we go forward from lower oil prices.
YDSTIE: Russia, Venezuela and Iran are all on that list. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.