Trump era energy policies will mean plunging prices for oil next year – which would likely mean dropping gasoline prices, too, a Wall Street firm’s analysts have predicted.
Of course, how you forecast depends on which of the administration’s pronouncements you choose to focus on, or – if you accept all of them -- how you think they will meld.
Bank of America Merrill Lynch analysts emphasize the new president's promise to slash regulations and environmental restrictions, which could spark huge investments in exploration and distribution of oil, according to the American Petroleum Institute, which cited the report as its top energy news.
And while even dramatic changes in the rules would take time to play out, they will mean much lower prices in 2018, said Merrill Lynch.
Much of the oil used in the United States comes from Canada and Mexico. But the boosts in production – along with added pipeline capacity -- will outweigh the impact of any border taxes, the analysts predicted.
Patrick DeHaan, senior petroleum analyst at GasBuddy, said he is skeptical about how fast or how far prices will fall.
“I think there’s some truth that oil prices will remain under pressure in 2018, but not so sure about plunge,” he said.
American production has jumped in recent years. But oil prices are shaped by global supplies, and those supplies have been ample largely because Saudi Arabia decided not to fight the falling price by cutting back on production. Instead its massive oil apparatus has continued to pump at high levels in the hope of making the new competitors unprofitable.
The result has been that added U.S. production led to a virtual glut – and lower prices. Some producers were forced out, but not enough of them to dramatically lift prices.
So the direction of the market may depend on the Saudis, DeHaan said. “While they’ve basically given up on the quest to take market share, I’m not sure what their next move will be.”
It is possible that the Saudis will redouble efforts to drive competitors out of the business, he said. “I just don’t see it happening so soon again.”
According to AAA, the average price of gasoline in Georgia is 36 cents a gallon higher than it was a year ago. But the price, which had spiked in late summer, has been coming down, as it typically does in late winter.
A number of stations in metro Atlanta this morning were selling gas as low as $1.99 a gallon for regular, according to GasBuddy's AtlantaGasPrices site.
GasBuddy reported that the current slide is because of "seasonally weak gasoline demand" combined with rising supplies. Weather has also played a hand, with rain and flooding dampening the driving in California.
According to the Energy Information Administration, gasoline demand is down a surprising 7.7 percent so far this year, compared to 2016.
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