Motorists are set to benefit from a significant drop in fuel prices over the next 18 months, with analysts predicting a significant drop in the cost of oil to $60 per barrel.
The expectation of lower gasoline prices comes on the heels of expectations that the global supply of oil will increase by 2030. Citigroup experts expect that the abundance of supply will force companies to reduce prices, as the price of crude oil is expected to fall to $60 per barrel from the current $80. .
This expected decline will not only make filling up at gas stations cheaper, but will also likely lead to lower airline ticket prices as jet fuel costs decline.
The International Energy Agency recently warned of a “staggering” surplus in global oil supplies by 2030. Citi forecasts suggest this will lead to a “very large surplus” by late 2025, which will drive down gasoline and diesel prices.
While drivers will welcome this news, it presents challenges for North Sea fossil fuel producers who are already burdened by high taxes. They face the prospect of more tariffs, with Labor unveiling plans to extend the windfall tax on oil and gas by a year until 2029 if it wins the general election.
Labour's proposal includes a 3% increase in the tax and the elimination of tax breaks for offshore industry. Sir Keir Starmer said the plan would generate £8.3 billion in taxes to fund Labour's Great Britain Energy Project, a publicly owned company that aims to “bring energy back to the British people”.
The plan has been well received by environmental groups, although industry analysts warn that the combination of falling prices and higher taxes could make the North Sea “the most hostile environment in the world” for oil and gas companies.
Ashley Quilty, oil analyst at Panmure Gordon, commented: “Labour’s plans will leave the UK colder and poorer. They will make the North Sea the most hostile environment in the world for oil and gas operators – apart from those working in war zones.”
Quilty and others believe Labour's proposals could halt most new development in the region, potentially affecting projects such as the Campo oilfield in West Shetland.
Chris Whitton, an analyst at Stifel, echoed these concerns, saying: “Labour’s tax plans would kill off the North Sea. There would be very little new investment, meaning UK oil and gas production would decline.” Very quickly – much faster than demand – the UK will become increasingly dependent on other countries for more of its energy needs.
Ed Miliband, Labour's shadow energy secretary, defended the plans, saying: “Labour is offering the country the most ambitious climate and energy plan in British history – investing in our country through Great British Energy so we can lower our energy bills for good. And make our energy needs better.” Securing the nation's energy, creating good jobs, and protecting our homeland for our children and grandchildren by tackling the climate emergency.