Jan 5, 2015 4:37 PM by CBS News
Oil prices are starting the new year where they left off in 2014: heading down
West Texas Intermediate (WTI), a U.S. benchmark crude oil, briefly fell below $50 a barrel on Monday, its lowest level since April of 2009. The price for Brent crude, another important oil price indicator, dropped through the $53 a barrel level.
This latest tumble in crude prices helped spark a selloff on Wall Street amid concerns that surging oil production will weaken global energy markets, discouraging industry players from investing and hiring. Oil supplies have spiked in recent years because of a boom in shale-oil extraction in North America and renewed production in Iraq, Libya and Russia. An economic slowdown in China and Europe is also tempering demand.
The slide in oil prices may be temporary. Analysts with Credit Suisse expects WTI prices to recover to around $75 per barrel by year-end. "While 2015 promises to be much more volatile, and more uncertain, we think it makes sense to expect that prices will (remain unusually low) fairly early in the year and then recover a little lost ground," the investment bank said in a report.
For now, the oil glut continues bring welcome news for American motorists. As of Monday, the average price at U.S. gas pumps had fallen for a record 102 days to $2.20 per gallon, or the lowest average for a gallon of gasoline since May of 2009, according to AAA.
The transportation group says the national average price for gasoline has fallen every day since September 25, for a total drop of $1.15 per gallon. The current price is roughly 40 percent less compared to last year's peak in April of $3.69.
"Barring any significant fluctuations in the price of crude oil," AAA said, "the average price at the pump is likely to remain below $3.00 per gallon in 2015, although prices may see seasonal increases this spring as refineries undergo maintenance, or this summer as demand increases during the busy summer driving season."
But AAA acknowledges that a sustained drop in gas prices will hurt domestic producers, some of which have begun job cuts and freezes on some projects due to declining oil prices. The group notes in a report that many U.S. oil companies "will increasingly face the choice of either continuing expansion plans or cutting capital expenditures in a market that offers significantly lower profit margins."
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