Falling oil prices have had a “tremendous positive impact” for consumers, and crude may slide even further, said Adam Sieminski, chief of the U.S. Energy Information Administration.
EIA projections show the average American family will save $750 this year at the pump, and people who use home heating oil in the Northeast will benefit even more than that, he noted Wednesday.
“That kind of drop that we’ve seen in energy prices has probably added to the GDP numbers in 2015 at a significant level. So that’s all positive,” Sieminski said at a Washington event hosted by the Christian Science Monitor and America’s Natural Gas Alliance.
Crude oil is trading under $50 per barrel and has lost more than half its value since July.
The picture isn’t entirely rosy for the U.S. economy. Low oil prices will prove challenging for U.S. producers in shale energy regions, which are more expensive to operate than conventional wells. The EIA already has lowered U.S. production estimates for the year to 9.3 million barrels per day, down from 9.5 million, though that still represents growth over 2014.
Sieminski attributed the lower prices to several factors: Surging U.S. shale production; weak economic forecasts in China and elsewhere; a strong dollar that has increased the price of oil for other countries, since oil prices are assessed in U.S. dollars; and a decision by the Organization of Petroleum Exporting Countries to not cut output.
“The evidence is pretty clear that the fundamentals of supply and demand have played a huge role,” he said.
Futures and options contracts for crude oil are trading even lower, with some hitting $30 per barrel, Sieminski said. That’s a big win for U.S. consumers, as he equated every $10 drop in the price of oil to 25 cents per gallon at the pump. But he said the $2-per-gallon most drivers are seeing across the country is about where prices will settle, though he added he is”getting leery” of making predictions.
“We’re probably near the bottom. But I’m not going to try to call a bottom,” he said.
