2014 Oil Investing No. 5: Lower Prices at the Pump
The dramatic increase in U.S. oil production over the last years has fueled an increased glut of supply across the nation. As a result, WTI prices and the price of oil-based products have experienced a steady decline in recent months.
The general consensus for U.S. oil prices is around $95 per barrel. Of course, should the Permian Basin continue to boom, and production costs fall, some analysts predict a decline in oil to fall as low as $70 to $75 per barrel in 2014.
That seems a bit too low, unless producers shut off certain rigs around the country in the wake of falling prices.
Even a decline to $85 to $90 (barring a significant geopolitical event) would be a significant boost to the U.S. economy and the pocketbooks of Americans. Any reduction in costs at the pump will only fuel stronger economic results for the United States, as consumers are able to allocate their money to more important goods and services in their lives.
Expect lower gasoline prices through 2014, as even more U.S. production creates a glut in supply. As a result, it is best to avoid exchange-traded funds tied to oil and gas prices until a bottom begins to form in the months ahead.
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