Oil prices remain relatively low despite OPEC’s best efforts.
Current crude prices are around $47 dollars a barrel, which is far less than the $108 a barrel oil was selling for in June 2014. OPEC has been reducing oil output to increase crude prices, but that plan doesn’t seem to be working so well.
“It’s all about the short-term glut that we have to deal with today, with the potential shortage months down the road,” Phil Flynn, an analyst at the investment firm Price Futures Group in Chicago, told Bloomberg. “For the market to establish the fact that it has finally hit bottom, we really have to get the price of oil back above $50 a barrel, which is still a tall order at this point.”
Oil prices will only rise if all of OPEC’s member countries follow the policy to reduce oil production, but some OPEC nations have been ignoring their pledges to do so. This means that although much of OPEC claims it is cutting production, in reality its member countries are exceeding their quotas which prevents the price of oil from falling much.
Combined with an increasing amount of new oil production in the U.S, this has made it much harder for OPEC to manipulate the price of oil.
The U.S. is now exporting more oil than four OPEC member states produce, according to a survey of energy analysts. The U.S. is already outproducing Libya, Qatar, Ecuador and Gabon; in 2017, U.S. companies could ship more oil overseas than those OPEC nation pump out of the ground.
OPEC’s attempt to boost global oil prices follows the organization’s 2014 attempt to depress the global price of oils to counter new competition, largely from U.S.-based hydraulic fracturing, or fracking.
In 2007, America imported about 60 percent of its oil, but by 2014, the U.S. only imported 27 percent of its oil — that’s the lowest level since 1985, according to the U.S. Energy Information Administration (EIA). EIA expects oil production to top nine million barrels a day in 2017.
This huge amount of new U.S. oil means that America is even exporting crude oil to OPEC members. Venezuela, a member of OPEC, has been forced by its failing economy to accept its first shipment of American crude oil last February, despite having some of the world’s largest petroleum reserves. The U.S. surpassed both Saudi Arabia and Russia in 2015 as the world’s largest and fastest-growing producer of oil.
Oil exports could boost the U.S. economy by $38 billion, reduce the trade deficit by $22 billion and add 300,000 new jobs by 2020, according to a study by ICF International and API. Another study by the Aspen Institute estimates exporting oil could keep the U.S. as the world’s largest oil producer while creating up to 1.48 million jobs.
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