Consumers might be celebrating the holidays early this year, as oil prices plummeted on Monday, falling to their lowest point in almost 7 years. This means lower prices for gas and heating oil, according to NPR. One of the main reasons for the plunge in price is the current oversupply of oil worldwide, with Saudi Arabia leading the way in overproduction in order to protect its share of the market, and drive out U.S. competitors. While a dream come true for the average consumer, this is bad news for energy companies.
OPEC officials met Friday in Vienna to deal with the situation and could not come to an agreement. "The decision by OPEC members to keep oil production output at record high levels has seen oil prices plummet again," said Sanjiv Shah, chief investment officer of Sun Global Investments, according to BBC News. OPEC asserts it will continue to produce more than 30 million barrels of oil per day, 2 million barrels above demand, which is causing on oversupply of oil, according to CNBC.
Brent Crude fell to $40.71 per barrel, the lowest in almost 7 years, and West Texas Intermediate fell to $37.65 per barrel, with the possibility of falling to $32 per barrel, reported CNBC. Prices will not seem to rebound for the foreseeable future, as Patrick Pouyanne, the CEO of Total, a French oil company, stated that production would still outweigh demand in 2016. Furthermore, the resiliency of tar sands and shale production is also keeping oil prices down for the time being. Oil production is expected to increase even more once sanctions on Iran are lifted next year,
Not all CEOs are pessimistic, as Amin Nasser, a Saudi Aramco Chief executive, said he is hoping for prices to regulate by early next year, after a decline in shale and tar sand production.
