Oil price forecast for 2016

1st January 2016

Saudi Arabia | Shale | Iran | Pump prices

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According to leading industry pundits, the price of oil is set to continue its fall in 2016 leading to cheaper prices at the pumps. It is just a news  prediction, remember. But there is credible evidence to support the claims. Currently, the average petrol price in the UK is around £1.04 per litre. It's reckoned that within a few months, we'll be looking at around 90 pence per litre, or less.

Why? Because demand in the UK continues to fall in spite of the exchequer's claim of continued British economic growth. In theory, Saudi Arabia, still one of the world's largest producers, could cut supply thereby raising demand. However, Saudi Arabia has localised political and economic intrigues to play out, meaning that it wants to keep the black stuff flowing and force prices down in order to sideline the competition. In particular, Saudi Arabia is happy to queer the pitch for Iran which is now approaching full flow in the wake of recently lifted UN economic sanctions.

Beyond that, the worldwide rise of shale oil is a serious threat to the Saudi's, and the lower they keep the price of their crude, the less attractive shale is to the competition leading to failed projects, lower profits and reduced influence.

The knock-on effect of these inter-Arab and East-West shenanigans has seen BP, Shell and other oil firms slash jobs, and has also seen a new raft of price wars as UK supermarkets fight it our for our custom.

And those supermarkets, now looking at lower delivery costs due to those same falling fuel prices, are further expected to ramp up their machinations and cut groceries bills further driving down inflation.

Should we be pleased? Not really. Falling fuel prices are a clear indicator that the UK is still in the financial doldrums and that full scale recovery isn't going to happen any time soon. But with the Saudis and the Iranians busy squeezing the deserts dry, and with oil demand falling in the USA and Canada where local oil production (not least shale oil) is bolstering demand, the price of petrol and sundry motorcycle lubricants could well be about to tumble.

So what should you do? Just make the most of it while it's on offer. But keep in mind that there are strict laws in the UK regarding the storage of petrol.

And remember that falling oil and petrol prices in 2016 are not (yet) a fact. It's just a prediction. So as ever, our recommendation is that we all should simply try and live for today.

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