Economy Watch: EIA Predicts Lower Oil Prices in ’15
- Nov 13, 2014
The Energy Information Agency is predicting lower oil prices next year, which on the whole would be a positive for the U.S. economy, though the agency also stresses the uncertainty involved in predicting prices. In a report released on Wednesday, the EIA said that Brent crude oil prices would average $83/barrel in 2015, which is $18 lower than it forecast last month (Brent is the international standard).
The forecast follows a recent steady drop in prices. Brent crude oil spot prices fell from $95/barrel on Oct. 1 to $84/barrel at the end of the month, the agency notes. According to the EIA, that was because of weakening outlooks for global economic and oil demand growth, the return to the market of previously disrupted Libyan crude oil production and continued growth in U.S. tight oil production.
Still, the agency said there’s “significant uncertainty” over the crude oil price forecast because of the range of potential supply responses from OPEC, as well as U.S. oil producers’ response to the new lower oil price environment, since much of their increased production relied on higher prices to pay for more expensive recovery methods. In the meantime, however, the drop in worldwide oil prices continues to put downward pressure on gas prices in the United States. AAA reports that as of Wednesday, the national average for a gallon of regular gas was $2.927, down from $3.199 a month ago.
Small business owners a little more optimistic
The National Federation of Independent Business reported on Wednesday that its Small Business Optimism Index was up in October by 0.8 points, back to its August level of 96.1. The gain was led by a modest increase in the net percent of owners who plan to increase capital spending and more who expect higher sales in the next three months.
“Those were the two bright spots in an otherwise mixed reading,” NFIB chief economist Bill Dunkelberg says. According to the survey, for example, owners are slightly less optimistic about business conditions over the next six months as well as the outlook for expansion. Also, a record low percentage of small business owners reported problems getting access to capital, and an unusually high number of owners say they have no interest in borrowing.
“They’re making capital investments and trying to fill positions despite that they cannot anticipate a better economy,” says Dunkelberg. “Basically they’re preparing to taxi the runway but they don’t expect to take off anytime soon. Local business owners, for the most part, can borrow all they need but mainly, they’re not interested now in taking on debt because they’re not confident in the future.”
Wall Street ended the day mixed on Wednesday, but still near record highs. The Dow Jones Industrial Average was down 2.7 points, or 0.02 percent, while the S&P 500 was off 0.07 percent. The Nasdaq gained 0.3 percent.