Prediction: Oil price plunge & California comeback

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Michael HendrixNational-chamber-foundation
Director, Research & Emerging Issues
U.S. Chamber Foundation Forum for Innovation

for your Friday reading.

Is the price of oil about to plunge? A new forecast from the International Energy Agency finds growing spare capacity in the global oil market, with many oil fields operating at less than full capacity. Recent years have seen oil markets sited on a precipice, with the merest hint of instability sending prices rocketing. Spare capacity will double next year and remain elevated through 2018. Here’s how this trend will impact the price of a barrel of oil:

“Brent crude is currently trading at about $102 a barrel. The IEA is forecasting $93 a barrel by 2018, and Brent futures on the ICE exchange are trading at $89 a barrel for that year. But prices could plunge more—last year, Citigroup forecast average $80-a-barrel prices through 2017, and they could drop even below that.”

Source: International Energy Administration (via Quartz)

Speaking of energy-related matters, it appears that a California comeback is possible thanks to the Monterey Shale Formation. This Rhode Island-sized patch of oil—stretching from Modesto to Bakersfield—holds upwards of 64% of all shale oil reserves in the United States. This could really benefit both California manufacturers as well as the struggling towns and cities in this stretch of California’s Central Valley.