Low oil prices could remain for 3 years

<p>The boss of BP has explained that oil prices could remain low for the next three years.</p>

Low oil prices could remain for up to three years, according to the head of BP.

Bob Dudley, group chief executive and a director at the British oil giant, explained to BBC Business editor Kamal Ahmed in Davos that the company was preparing for a sustained period of low oil prices. He explained that this could potentially have a knock-on effect to UK petrol prices and said if the trend was to continue then petrol could dip below £1 per litre.

It is a much bleaker story in the oil industry if the predictions come to fruition. A continued drop in oil prices could see job losses and falling investment in the North Sea oil industry. It would mean companies would have to reduce supply to stimulate the market and eventually push prices back up.

Mr Dudley told the BBC: "Companies like us, at BP, we're going to need to rebase the company based on no guarantees at all that the price will come back up. We have go to plan on this [price] being down, and we don't know exactly what level, but certainly a year, I think probably two and maybe three years."

The price of oil has taken a sharp dive in recent months. From 2010 to mid-2014, the average price of a barrel of oil was around $110 (£72.58) but the remainder of last year saw prices plummet. Brent crude oil has now fallen to around $48 a barrel while US crude is also down to $47.

Falling oil prices has been the main topic for conversation in recent meeting of the Organization of Petroleum Exporting Countries (Opec). Members of the cartel met in Vienna in November to discuss a potential cut in production to boost prices. Nations such as Saudi Arabia and non-member Russia opposed a move of this ilk and the current production levels were maintained.

Find out about commodities trading and learn CFD strategies at City Index

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.