Oil prices at their lowest since 2004

Oil Prices

The price of oil has fallen by more than two thirds to the lowest level since the summer of 2004. Oil prices have fallen due to higher production as demand has slowed.

Brent crude prices dropped just under 2% to $36.17 a barrel, marking a weaker price than that of $36.20 on Christmas Eve of 2008 during the global financial crisis [1]. Brent oil is now worth less than a third of its value 18 months ago, where it topped $115 [2].

This has led to reduced fuel prices across the UK, where in the past week the price of petrol has fallen below £1 per litre for the first time since 2009, with prices expected to stay low until early 2016 [3].

Analysts from Goldman Sachs have predicted the price falling to as low as $20 a barrel before it recovers.

There is an abundance of oil, with already record stockpiles in the US. Demand is expected to be hit by a post interest-rate jump in the dollar following the US budget announcement last week, as oil becomes expensive for overseas buyers [4].

The US budget aims to reverse austerity and integrate measures to achieve fiscal sustainability and growth for the future, including reducing deficit by raising capital gains rates, research funding for inflation, and eliminating financial loopholes [5].

However, there is a consensus view that oil will trade at higher than average prices in 2016, meaning consumers will not be able to enjoy fuel savings for much longer.

[1] The Guardian. ‘Oil price falls to lowest since July 2004’.

[2] Sky News. ‘Oil price slumps to lowest level since 2004 (article removed)

[3] The Sunday Times Driving. ‘Christmas cheer for drivers: cut-price petrol falls to under £1 a litre’.

[4] The Week. ‘Oil price: no relief in sight as crude hits 11-year low’.

[5] The White House. ‘The President’s Budget for Fiscal Year 2016’.