One of the most-asked questions and also least clarified is: “Why have oil prices quadrupled over the last decade with U.S. demand lower and production on the upswing?”
The Federal Reserve’s “Beige Book,” which describes economic conditions throughout the central bank’s 12 districts, summarizes the overall outlook as “modest to moderate.”
The startup of the new Cushing market link pipeline to the Gulf Coast, as well as strong Midwest refining runs helped reduce oversized oil inventories at the Cushing, Okla., storage hub to the lowest level in two years.
Most energy analysts have been surprised by the recent price climb of West Texas Intermediate crude oil to more than $100 per barrel. Since U.S. demand, which reflects the domestically extracted “light crude,” traditionally generates its lowest prices in the winter months, historically annual prices dropped accordingly in 2013, during which prices averaged from the low to middle $90s.
Although hydraulic fracturing (fracking) has engendered the possibility of shale-produced oil and natural gas, vaulting the United States into the world’s No. 1 spot in fossil-fuel production (oil, coal, natural gas), prestigious financial weekly Barron’s now estimates up to $1 trillion in capital-goods spending will be generated to make this happen by 2025.
While the 2014 economic year is in its infancy, there are a number of positive factors indicating the current year will be the strongest comeback year since the end of the recent Great Recession and have the makeup of strong diversified economic elements.