Oil’s Dramatic Fall
In recent weeks many of us have been the beneficiaries of a swift fall in the price of oil. As the price of oil has hit levels not seen since 2009, gasoline prices have likewise dropped to the lowest levels in four years. This is coming at great time for consumers as we are in the heart of the holiday shopping season. In fact, lower gasoline prices could save the average household as much as $750 annually according to a recent Wall Street Journal article.
The dramatic fall in the price of oil is due to several factors both domestically and abroad. Here in the US oil production has continued to grow due to the shale boom in areas like North Dakota. The US now produces nearly 9 million barrels of oil per day which is only 1 million barrels shy of the production by oil giant Saudi Arabia. Abroad, a global economic slowdown has reduced the demand for oil and OPEC production has continued to exceed market expectations. These factors along with a strong dollar have combined to lead to a 40% drop in oil prices.
Oil prices have long been very volatile, so don’t count on prices staying where they are for long. If OPEC decides to increase production goals, the global economy picks up or certain oil producers are unable to produce at the current low prices then we may see prices move swiftly the other direction. For now, enjoy the low prices at the pump for your holiday travels.