The oil prices crossed the $50/barrel barrier in December and are
currently entrenched at around $55/barrel level (Brent Crude Oil). This has
been possible due to the plans by the OPEC and other oil producing
nations to reduce their oil output. However, the recent days brought
expectations that the increased production of shale oil in the US would reduce
the impact of those outputs cuts. These expectations have had a rather
insignificant impact on the oil prices in the recent days. But, going forward,
this impact could be much bigger.
The investment bank Goldman Sachs was reported by the CNBC to anticipate
a 25% jump in the prices of U.S. crude futures, also known as West Texas
Intermediate (WTI), in comparison to the global prices if the U.S. implements a
switch to border-adjusted corporate tax (BTA). This would trigger large-scale
production in the U.S. The U.S. crude oil production has been rising steadily
since mid-2016. However, at the moment it is still about 7% lower than its historic
maximum, posted in mid-2015 (see below).
It is Donald Trump administration’s goal for the U.S. to become energy
independent. On the path to this goal, there are many technological and
regulatory obstacles, and oil futures currently only imply a 9% probability for
such a shift, said Goldman Sachs. But, if implemented, this shift will drive
ex-USA oil prices (Brent Crude) down to $40/barrel in 2020, according to
Goldman Sachs.
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