Investment Banks Project Steep Decline In Oil Prices

Nick Kangadis | January 13, 2016
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(Image: ISNA)

Oil prices have been in freefall for the last year and a half.

As of today, crude oil is trading at $30.38 a barrel. But just eighteen short months ago, that price was set at $106 a barrel -- 71.3 percent higher. If the same thing happened to our stock market, it would be the biggest sustained loss since The Great Depression, when the market dropped 89 percent in a thirty-month span.

The Telegraph reported Tuesday that major banks such as Standard Chartered, Goldman Sachs, Morgan Stanley, and RBS are predicting oil price projections at $10 a barrel by the end of the year. A huge oil surplus and falling demand are pushing analysts to predict the lowest gas prices since 2009.

Standard Chartered weighed in on the subject:

"Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the dollar and equity markets.”

Despite requests from multiple members, Opec stated that they would not hold any emergency meetings.

As Mehreen Khan of The Telegraph noted, “Opec meets twice a year, but its latest gathering in December ended in a fractious stalemate over production targets, as Saudi Arabia and Iran struggle for dominance of the world's market share.”

If oil prices did fall as low as $10 a barrel, gas prices could dip to as low as $1.24 a gallon on average. And while that may be nice for your wallet, it is also a scary proposition for the world economy, as China and Russia have both seen their markets become erratic and dive periodically due to fluctuations in oil prices.

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