$20 Oil in Six Months? That’s What Goldman Sachs Says

Thanks to dropping oil prices, American families likely saved over $700 at the pump last year.

By Published on February 9, 2016

Oil could drop below $20 a barrel due to lower than expected demand and excessive supply, according to research by investment bankers at Goldman Sachs.

“Once you breach storage capacity, prices have to spike below cash costs because you have to shut in production almost immediately,”  Jeff Currie, Goldman Sachs’ head of commodities research, said in a January interview with Bloomberg Television. He claims that he “wouldn’t be surprised if this market goes into the teens.”

Currie expects that prices will swing between $20 and $40 a barrel over the next year. The International Energy Agency also predicts that the price of oil will remain relatively low.

The price of a barrel of oil on Tuesday was $29.59, according to data aggregated from the Energy Information Administration and the Bureau of Labor Statistics. The price of oil has fallen more than 70 percent since the summer of 2014 due the surge in oil production in the U.S. and slowing economic growth around the world, especially in China.

Others think that the price of oil could increase. Harold Hamm, CEO of the energy firm Continental Resources, said in January that he believes the price of oil will double to $60 by the end of 2016.

Hamm, best known for using hydraulic fracturing to develop large shale oil reserves, believes oil companies will decrease production until the market recovers. Hamm also thinks the Organization of Petroleum Exporting Countries (OPEC) will soon be “almost a nonentity” as it loses its ability to control the price of oil.

Gasoline prices have also hit lows unthinkable just a few years ago. U.S. consumers spent $370 billion on gasoline in 2014, meaning the price drop is equivalent to an extra $102 billion in the pockets of consumers. Families likely saved $700 to $750 at the pump in 2015, according to the Energy Information Administration.

 

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