Gas Prices to Hit All Time High?

Back in 2010, John Hofmeister, former President of Shell Oil, predicted gas prizes would soar to $5 a gallon in 2012 due to rising crude oil prices. However, Hofmeister missed his mark as they only reached $4 a gallon. Now today, Hofmeister is preaching that people should look out for that $5 a gallon scenario again.

Today, gas is $2.14, it’s lowest price since May of 2009. Hofmeister wants drivers not to get too comfortable with this price as he believes things will be very different later this year. With crude oil hitting below $46.50 a barrel today, Hofmeister believes crude oil will rebound back to its $80-90 price range and with that rebound, people will again be paying at the pumps. While the price of oil continues to decline, we did however see some resistance. Last week, the price of oil had its first rise in almost two months. This could be just the first of many signs to come.

Hofmeister believes that if we do not see $5 a gallon this year or early next, that it will at least happen sometime this decade. If demand growth continue to climb towards 100 million barrels a day and industry production falls short, we can very well see $5 a gallon. To help instill confidence in this theory, Ryan Lance, CEO of ConocoPhillips, also believes oil prices can rebound faster than anticipated, much like they did in 2009.

While Hofmeister is a credible person and we have every reason to believe him, other credible sources in the industry have different views on the future of gasoline prices. The US Energy Information Administration predicts an average gasoline price of $2.33 this year and $2.72 in 2016. Obviously this a very different prediction compared to Hofmeister. While Hofmeister was wrong in 2010, he still was not far off. Prices did in fact rise to $4, so do we take what he has to say seriously this time around?

For more, please visit CNBC ‘s take on the issue. For more information on drilling and oil news, please visit Maritime Drilling School .

Oil Prices Dropping in 2015

With gas and oil prices so slow these past couple of months, it’s no surprise that barrel prices are at $70, which is 40% lower then it was in June earlier this year. These prices are based to what The North Sea Benchmark, Brent crude. These low prices have caused energy stocks to lose an estimated $500 billion this past week alone. In order for the North Sea Benchmark to balance the budget in 2015, they must be selling their barrels at $93 in Saudi Arabia, and as much as $120 a barrel in Russia.

According to analysts there are three major factors that have gone into these dramatic spikes in oil prices are:

1. US oil and drilling is more efficient

Recent US pipelines and fracking that have been growing the US has been highly effective  the past few years which has dropped the need to get oil and gas from other international distributers. This and the high number or electric and hybrid cars trending in the US has caused consumers to need less gas. Since the North Sea Benchmark prices are so low though, the US gas and oil suppliers have been buying these barrels at $70 a barrel. If this trend continues, gas prices will continue to further drop and be at a low that has not been seen since the early 2000′s.

2. No demand needed in developed countries

Developed countries which have a stable oil economy and are able to hold off on buying oil. This is because of the low oil prices around the globe, so rather then selling the oil at a very low price, keeping it for their own economy and selling it at their normal prices, keeping their domestic oil economy stable.

3. China’s economy is down

China accounts for about a third of all the worlds gas consumption alone. The Chinese economy has been in a slump recently so the usage of gas and oil has dropped drastically. It goes hand in hand that with China’s falling economy that gas prices will be down since the demand for gas and oil is not there in the most demanding country in the nation.

For more please visit: MarketWatch

Powder River Basin in Wyoming

With flagging industry exacerbated by the economic downturn in 2007, many areas in the United States have become economically depressed over the last fifty years. In areas that once provided blue collar workers with a plethora of factory or mining jobs, such as West Virginia, but have been in decline, many have cashed in on the expansion in domestic oil and gas drilling. Wyoming, too, has been in decline for decades, but now finds itself a potential poster child for oil- and gas-driven economic revitalization.

maritimedrillingschool_basin Oil production in the Powder River Basin in northeast Wyoming had been flagging since the mid-20th Century; however, according to study released by the U.S. Energy Information Agency, this trend of decline has effectively been reversed thanks to advancements in extraction technologies such as hydraulic fracturing. In 2009, production reached an average of around 38,000 barrels per day during the first quarter, with a yearly total of over 17 million barrels.

Since then, 590 new wells have been built. In 2013, figures supported by data from both the U.S. E.I.A. and the Wyoming Oil and Gas Conservation Commission show that the new wells and improved practices drove production to around 78,000 barrels per day, reaching 30 million barrels by the end of the year. Much of this increased production has actually come from the older wells in Campbell and Converse counties, where newly improved methods have once again made it profitable to extract. In effect, oil production has been doubled over the last five years, a welcome return for oil and gas companies and a wave of relief to workers feeling the strain from the economy.

Plans for expanding the extraction operation are ongoing. Currently, the U.S. Bureau of Land Management is studying the potential for Converse County, Wyoming to support the construction of over 5,000 additional wells over the next 10 years. With production having doubled in the last five years from just under 600 wells, the prospects of the increased production that would come from the addition of 5,000 wells over ten years are tantalizing.

There is sure to be oil and gas ready to be tapped for years to come, but industry economists acknowledge that their profitability will be largely predicated on domestic oil prices. Domestic oil prices have been declining over the last quarter, but as long as the price remains above $90 per barrel (the price is currently at $92 per barrel), experts say that production will still be viable.