THE WORLD HAS entered a “new era” of oil use in which supply will outstrip demand, according to one industry analyst.
The price of crude oil dropped 9% last month after a September report from the International Energy Agency predicted lower global demand both this year and the next.
It hit a low of $83.78 (€67.11 at today’s rates) per barrel last month for Brent crude oil, which is used as the benchmark for about two thirds of the world’s internationally traded supplies.
The price has dropped further since the start of November and is currently sitting over 25% below the going rate from June.
Bord Gáis energy trader John Heffernan said despite ongoing turmoil in the Middle East, there had been a “flood” of supplying coming from countries outside OPEC – a consortium of the biggest oil suppliers including nations like Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
“The fall reflects the reality of a new era in world oil with global oil supply growth outstripping demand,” he said.
“In response to surplus supplies and a shrinking market, key producers such as Saudi Arabia and Iran reportedly slashed prices to defend market share.”
What will the big oil producers do now?
Heffernan said the question was how OPEC would respond to the price drop, either cutting production to boost prices or accepting the new, lower prices in a bid to compete.
In recent years, the US has dramatically increased its production of “light tight oil”, also known as shale oil, which is produced with the same “fracking” techniques used in shale gas production.
That output boost, combined with the lower global demand, has made consumer countries less dependent on the once-dominant OPEC alliance.
Bord Gáis’s Energy Index, which measures the overall cost of wholesale energy supply, dropped 5% last month as the big decrease in oil prices was partially offset by more expensive natural gas, coal and electricity.
So will it get cheaper to fill up the car then?
Sadly, the cheaper wholesale prices will make little immediate dent in the cost of filling up the car as any savings take a while to filter down the production chain and nearly 60% of retail petrol and diesel prices go straight to the government in taxes.
Since June, the euro has also fallen nearly 10% against the US dollar which has eaten up some of the drop in oil prices.
The average petrol price was €1.54/litre last month, down from €1.57/litre in July but still above rates from early in the year.
Prices peaked at €1.70/litre in September 2012 after global oil prices hit a 150-year high the previous year.
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