What’s Bad News for the Oil Companies is Great News for Consumers

While this news doesn’t come out of the United States, it’s still bound to make US consumers everywhere quite happy. 

It was recently reported that Bob Dudley, the CEO of oil giant BP, said that oil prices are going to go lower and remain low for at least a year and possibly up to three years.

In fact, when he was interviewed by the BBC recently (that’s the British Broadcasting Company for us Yanks), he said that BP was making plans to deal with lower prices for the next few years, including job losses and falling investment in the North Sea oil industry. It was also reported that the oil industry is going to be cutting back on capital spending by 10 to 13% in 2015 due to these slumping oil prices. 

Most American consumers have been extremely happy about the rapid drop in gasoline prices over the last few months, a feeling that is compounded in the UK, where prices have historically been about 30 to 40% higher than those here in the states.

When interviewed, Dudley said that oil prices have historically always fluctuated and, when they do, they usually remain low for a number of years. He was quoted as saying “we have got to plan on this price being down, and we don’t know exactly what level, but certainly a year. I think probably two and maybe three years.” 

Although it’s been reported that oil prices around the world stayed relatively stable since 2010 until about the middle of 2014, at approximately $110 a barrel (US), since June of last year the price for one of those barrels has been cut in half and is now hovering around $48 a barrel. US crude is even lower at $47 a barrel. 

While consumers in many countries are happy about these lower gasoline prices, the fact is that many countries, even some that you wouldn’t think about at first, are being affected and will continue to be affected negatively by these falling oil prices. For example, Scotland, which sees many employed in the North Sea oil industry, is going to see some very big economic challenges. Indeed, there are two large projects right now that BP has in the North Sea and many of the people that are working them are from Scotland.

One worry that many have is that, once these low prices and, oil will again rebound and gasoline prices will shoot back up to even higher than they were at their highest in 2014.

It just goes to show that, for every silver lining, there’s a dark cloud on the horizon. For the time being however, the average consumer, both here in the United States and in the United Kingdom, are feeling a lot less of a stinging sensation at the gas pumps.

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