Ready for some good news at the pump? After years of rising gas prices, consumers should soon be able to fill up their tanks at rock bottom costs. Oil prices are already lower than they have been since 2009 and aren’t even close to settling. Crude has already plunged more than 40 per cent this year and prices are hovering around $42 a barrel, a considerable drop from $100, and the lowest figure in six and a half years.
An AAA report showed that the average price of gasoline in America is now $2.66 a gallon, down from $3.45 a year ago.
$15-$20?
According to David Kotok, a well-known money manager and financial economist, "There is no evidence whatsoever to suggest we have bottomed. You could have $15 or $20 oil – easily."
The key factor fueling the plummet is the vast quantities of oil supplies in the Middle East, intensified by the recent Iran nuclear agreement. With OPEC, led by Saudi Arabia, refusing to cut back on its production and China’s economic slowdown, prices can only go in one direction.
Kotok continues: "The Saudis' best weapon is the lowest oil price at maximum volume. They have enough financial reserves to have staying power for years."
In addition, U.S. oil production is at record highs, and despite severe cutbacks in drilling rigs, U.S. producers are proving to be more efficient, resulting in continuous high output.
$15 may sound totally outrageous but some grades of crude are already close to reaching that level. Western Canadian crude, for example, a heavier type of crude that is more difficult to refine, is currently trading in the $20 range.
Not all analysts agree with Kotok and some see oil prices settling at about $60 a barrel before turning around and moving back up.
