Lower Oil Prices may not Benefit US Consumers
The producers of crude oil in North America appear set to lower global oil prices throughout the coming years. However, consumers in the United States are not expected to gain much from that due to profit-taking among refiners.
Anthony Scott, oil analysis manager of Platts’ BENTEK Energy, recently said that the current oil prices of world crude are anticipated to shed $15 to a $100 per barrel by 2018 due to new crude production from the Permian Basin and Eagle Ford formations of Texas, the Bakken formation in Montana and North Dakota, Canadian oil sands, and additional oil exports coming from Iran, Iraq and Libya that hadn’t been available on the market due to political reasons.
In the U.S., the price of oil will drop even further to $74.33 per barrel because excess supplies close to the fields are pushing refiners to ask for more discounts, according to Scott. In the past several months for instance, the U.S. benchmark crude has discounted by $25 to $30 per barrel compared to the oil made in Eastern Texas.
The fresh supplies of crude oil from North America are anticipated to somewhat mitigate the oil imports of the U.S. from the Middle East and elsewhere. However, until the producers in the U.S. can export crude on their own, which is prohibited by law without the authorization of the President, refiners in the U.S. will benefit the most because they can sell as much finished product internationally as they desire. Last year, such exports amounted to around 3 million barrels daily.
This leads to a situation where consumers in America end up paying for gasoline at the global oil prices, said Scott, while refiners are able to obtain North American crude at a discounted rate in an overabundant market. If per barrel crude price declines of $25 trickle down to the price of gasoline, it would cost less – by around 75 cents per gallon.