Oil Breaks $60 Threshold for First Time in Five Years
By CLIFFORD KRAUSS
DEC. 11, 2014
HOUSTON — The American benchmark price for crude oil broke the symbolically important $60 a barrel mark on Thursday for the first time in over five years, underscoring a remarkable drop of over 40 percent since early June.
It was accompanied by another steep decline in gasoline prices, with the AAA motor club reporting that the national average for a gallon of regular gas on Thursday fell to $2.62, nearly two cents below the day before. After dropping nearly a penny a day over the last month, the average price for a gallon of regular is about 64 cents lower than a year ago.
The immediate cause for the continuing collapse in oil prices was a comment by the Saudi oil minister, Ali Al-Naimi, in Lima, Peru, on Wednesday that suggested that the OPEC cartel was not likely to change anytime soon its decision last month to leave production quotas unchanged.
“Why should I cut production?” Mr. Al-Naimi said.
Saudi officials have projected that oil prices would drop to about $60. The United States benchmark, known as West Texas Intermediate, is just above $59 and the Brent international benchmark is below $64. Some Wall Street analysts have predicted crude could trade below $50 in the coming weeks.
The collapse in prices has led to a rising tide of oil company announcements this week of investment cuts for 2015. Oasis Petroleum of Houston, an important producer in North Dakota’s Bakken shale field, said it would slash its drilling budget from $1.4 billion to $750 million.
Goodrich Petroleum, another company based in Houston with production in Texas and Louisiana shale fields, announced it would cut its 2015 drilling budget from more than $325 million to between $150 million and $200 million.
Many of the largest oil companies have also said they will cut their investments and lay off some employees, but most are projecting higher production in both their shale fields and in the deep waters of the Gulf of Mexico.
Lower oil and gasoline prices should help consumers, particularly those in the lower income brackets who generally drive older, less efficient cars and whose energy costs represent a larger proportion of their incomes.
But many here in Texas remember the oil price bust in the 1980s that crushed the state economy, leading to high unemployment in the petroleum fields and bank failures. So far, however, real estate prices continue to rise in Houston and Dallas and there are few signs of immediate distress.
DEC. 11, 2014
HOUSTON — The American benchmark price for crude oil broke the symbolically important $60 a barrel mark on Thursday for the first time in over five years, underscoring a remarkable drop of over 40 percent since early June.
It was accompanied by another steep decline in gasoline prices, with the AAA motor club reporting that the national average for a gallon of regular gas on Thursday fell to $2.62, nearly two cents below the day before. After dropping nearly a penny a day over the last month, the average price for a gallon of regular is about 64 cents lower than a year ago.
The immediate cause for the continuing collapse in oil prices was a comment by the Saudi oil minister, Ali Al-Naimi, in Lima, Peru, on Wednesday that suggested that the OPEC cartel was not likely to change anytime soon its decision last month to leave production quotas unchanged.
“Why should I cut production?” Mr. Al-Naimi said.
Saudi officials have projected that oil prices would drop to about $60. The United States benchmark, known as West Texas Intermediate, is just above $59 and the Brent international benchmark is below $64. Some Wall Street analysts have predicted crude could trade below $50 in the coming weeks.
The collapse in prices has led to a rising tide of oil company announcements this week of investment cuts for 2015. Oasis Petroleum of Houston, an important producer in North Dakota’s Bakken shale field, said it would slash its drilling budget from $1.4 billion to $750 million.
Goodrich Petroleum, another company based in Houston with production in Texas and Louisiana shale fields, announced it would cut its 2015 drilling budget from more than $325 million to between $150 million and $200 million.
Many of the largest oil companies have also said they will cut their investments and lay off some employees, but most are projecting higher production in both their shale fields and in the deep waters of the Gulf of Mexico.
Lower oil and gasoline prices should help consumers, particularly those in the lower income brackets who generally drive older, less efficient cars and whose energy costs represent a larger proportion of their incomes.
But many here in Texas remember the oil price bust in the 1980s that crushed the state economy, leading to high unemployment in the petroleum fields and bank failures. So far, however, real estate prices continue to rise in Houston and Dallas and there are few signs of immediate distress.
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