Trade Tensions, Global Economic Slide Will Keep US Gas Prices Low This Year

The ongoing trade war going on around the world, and several economies sagging will combine to keep gas prices low for the next several months, a Texas analyst tells News Radio 1200 WOAI.

Adam Cooper of Texas-based Quest Automated Services,' an oilfield services firm, says the fall in fuel prices at the pump that we have seen over the past several months is expected to continue, with some motorists likely to see gas prices below $2 a gallon by Christmas.

"With current production rates, you are going to see prices probably drop for a little bit," he said.

West Texas Intermediate, and U.S. benchmark, has been trading around $55 a barrel for the past several months, sharply lower than the $65 range that WTI was trading in during the late spring and early summer.

The lower crude prices also mitigate the chances of a recession in the U.S. One of the main reasons the U.S. fell into a recession in 2008 was the price of oil, at the time WTI was trading at a now incomprehensible $140 a barrel.

Cooper says with the U.S. now energy independent and, in many ways the world's swing producer, with the ability to start and stop production to meet rising prices, the Texas fracking fields will stabilize any wild price changes. But he says that also means that if the currrent trade worries continue pushing prices down, Texas wells will begin to be capped. We have already seen Texas oilfield employment start to taper off, according to figures from the Texas Workforce Commission.

"It kind of hurts us in the oil and gas industry here in Texas, because prices are going to stay low as long as we are going out and drilling and making massive finds the way we have been," he said.

So the Texas fracking industry will both control the global price and will be at the mercy of it, Cooper said. He says as Texas wells begin to shut down due to lower global prices, and Saudi Arabia and Russia take expected steps later this year to drive down global supplies, that will raise prices by early to mid 2020,which will then prompt Texas producers to resume production.

But Cooper says it takes a long time for the slow draw down of production which is now underway in the Permian Basin and in the Eagle Ford to affect the price of gasoline, so he expects prices to continue to fall for the rest of 2019, with a rebound likely in 2020.

He says after the Obama Adminsitration authorized the sale of U.S. crude oil overseas, Texas oil producers have been more at the mercy of international trade trends, and with the tariff wars showing no signs of fading, that pressure will continue to affect Texas frackers, as well falling demand due to slower growth overseas.

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