Crude oil prices have dominated headlines and industry attention over the past year. In 2014 and continuing in 2015, the Organization of the Petroleum Exporting Countries (OPEC) agreed to unconstrained output for it 12 member countries, resulting in a dramatic increase in global oil supply. Meanwhile, China and Europe’s demand for oil has remained relatively steady. In addition, U.S. domestic production nearly doubled since 2008, decreasing domestic imports and leaving more oil on the global market. As a result, oil prices fell from $90 per barrel in 2014 to $46 per barrel today and projections indicate prices between $30 and $60 per barrel in 2016, depending on Iranian production.
The price drop has reverberated across the U.S. oil and gas industry. Companies have responded by delaying or cancelling new investments and a recent report by Wood Mackenzie estimates $1.5 trillion in projects is at risk if prices remain near $50 per barrel. According to the U.S. Energy Information Administration (EIA), sustained low oil prices could reduce investment in exploration and production. In addition, there are concerns about potential impacts on U.S. employment as well as state royalty payments, especially in Texas, North Dakota and Louisiana.
However, continued low oil prices can also create opportunities for some U.S. industries. Low prices have spurred a wave of innovation in extraction, challenging producers to develop new technologies that streamline production. The International Energy Agency (IEA) further estimates producers will spend close to $23 trillion globally by 2030 to build new infrastructure to maintain and grow production. Lastly, low oil prices benefit consumers, especially low-income families who spend a greater portion of their income on energy costs.