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Professor Colares discusses impact of low oil prices

Wednesday, January 7, 2015  /  Rate this article:
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Professor Juscelino Colares, Associate Director of the Cox Center, was among a group of experts who participated in a public radio broadcast on Jan. 7 about the rationale and repercussions of current low oil prices.

Gas is well under $2 per gallon in the Cleveland area, a far cry from the near $4 per gallon last year. Why the sudden drop?

On The Sound of Ideas, Colares suggests that oil-producing Saudi Arabia is putting pressure on other countries, such as the U.S., that are also drilling for oil and have increased their role in the marketplace. At a much lower price, drilling for oil becomes a less lucrative business venture, and Saudi Arabia may be able to push out other oil drilling areas from the market.

Yet, access to new tight oil resources through hydraulic fracturing means that OPEC's ability to play a waiting game and jack up prices in the future is going to be more limited going forward.

“Over a certain threshold (say, around $70.00/barrel), previously drilled wells and new wells can come into production very quickly, limiting OPEC's power to keep prices high,” Colares said.

For more on Colares’ remarks, listen to the full broadcast here.

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