At the beginning of July, U.S. oil topped $100 a barrel for the first time this year, and it hasn’t gone back below that threshold since.
And at the pump, drivers are paying more for gasoline, at an average of $3.65/gallon versus $3.49 a year ago and $3.54 just a month ago.
More supply usually means lower prices so why, you may ask, have prices been rising when crude oil production in this country grew by more than one million barrels a day last year, the largest increase in the world and in U.S. history?
The short answer, is that we did see that impact on oil prices, especially outside the U.S. That’s what Ed Morse, head of global commodities research at Citigroup (C), tells The Daily Ticker in the video above. (West Texas Intermediate oil - the U.S. oil benchmark - was about $85 a barrel last October, for example.)
But Morse says the recent gush of oil coming through the U.S. system by virtue of new pipelines has brought oil prices to “world equilibrium.” Prior to that, U.S. oil had been losing value as it sat trapped in the middle of the country.
WTI oil has since converged with Brent crude, the global benchmark. And gasoline, 80% of which reflects the price of oil according to Morse, has risen in turn.
Morse, who is also former U.S. deputy assistant secretary of state for international energy and one of the 12 smartest people on Wall Street (according to Business Insider), tells us there is good news ahead.
“The U.S. is the fastest growing oil and [natural] gas producing country in the world,” Morse says. “We’ve now gone above Russia as the largest [natural] gas producing country… all of this will lead to softer and softer markets and lower prices in the years to come.”
Morse thinks we’ve reached the top for oil and gas prices. He expects oil prices to fall this year, and prices at the pump to ease this year for consumers pretty much from here on out. Check out the accompanying interview to see how far he expects prices to fall.
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