Why is the price of gas so low?

Why is the price of gas so low?

“Can Someone Explain To Me Why Gas Prices Are So Low All Of A Sudden?”

The biggest factor is the law of supply and demand.

The world is awash in oil right now, particularly due to the U.S.’s fracking boom. Fracking – a method of extracting natural gas from shale rock deep below the earth’s surface – has boosted American oil production to its highest level in three decades.

Because there is so much oil on the market, the price is sinking. According to Venezuelan officials, the world has an oil surplus of 2 million barrels a day. The result is that current projections say oil’s drop in price will not end until at least 2017.

Yes, the U.S. is producing a lot of oil.

The U.S. pumps about 8.9 million barrels a day. Saudi Arabia, the world’s leader in oil production, produces nearly 9.6 million barrels a day.

But isn’t oil production and its prices run by OPEC, which is a cartel?

Yes, OPEC (Organization of Petroleum Exporting Countries) is a price-fixing cartel.

OPEC’s 12 member countries (which include Saudi Arabia, Venezuela, Iran, and Iraq) together control 60% of the petroleum traded internationally. Instead of competing with each other on the free market, these countries coordinate production and pricing in order to maintain steady profit for everyone in their club. Americans have always complained that this price fixing is unfair. (The U.S., by the way, is not part of OPEC so it’s high production competes directly with OPEC members.)

OPEC’s price fixing is one reason the price of gas is not considered a fair market price. Compare that to smart phones, for instance, where Apple and Samsung bitterly compete on products and price. If smart phones makers were like oil producers, Samsung and Apple would get together and set a price. Of course, such a move would constitute an illegal cartel under U.S. law, but, as far as the price of oil is concerned, the foreign countries in OPEC aren’t subject to U.S. anti-trust law.

But most think that OPEC’s influence on price is waning.

That’s evident from the organization’s decision last week that it would not reduce production. Here’s why that decision is important. Generally, when the price of oil sinks — as it has lately with the price of a barrel dropping to lows not seen since the Great Recession — OPEC members wil cut production. The logic here is that reduced production will reduce supply, thus boosting prices.

The fact that OPEC is doing the opposite right now shows that it feels it cannot push the price on its own. Instead, its hoping a price war — where prices keep dropping — will decimate U.S. producers because the price of oil won’t be high enough to make their expensive extraction operations profitable. Or, as Foreign Policy explained, OPEC is hoping to “kneecap” the U.S. oil boom.

This OPEC decision is a pretty big deal.

The Energy Minister of the United Arab Emirates — a member of OPEC — admitted to Bloomberg that OPEC countries no longer dictate price. If you remember your uncle railing about OPEC every Thanksgiving, that changes what we know about oil and the way the world works.

Will OPEC be able to kill U.S. oil production?

Experts think most U.S. oil producers can weather the price war and survive with oil selling for less than $70-a-barrel, which is where it’s trading right now. It’s still cheaper, however, to drill oil in Kuwait than it is to frack in the United States. Theoretically, there should be some low price at which American producers cannot compete. The question is how low the price must drop to drive U.S. frackers out of the market. One of the reasons no one knows that exact price is because extraction technologies keep getting cheaper. One estimate says that costs have fallen by 50% the last two years and might fall another 15% next year.

Is there anything else driving down the price?

Yes, the International Energy Agency (IEA) also cites weak demand for oil, especially in China, and the strength of the U.S. dollar as contributing factors.

How will the price of oil affect me in the United States?

If you have a car, you’ve probably noticed lower costs at the pump as gas prices have decreased 64 cents over the last few months. It also means that Americans have more money to spend on consumer goods this holiday season. This should also theoretically help air travelers as lower fuel costs make each flight cheaper for airlines. That’s all good!

So wait, fracking is awesome?

Depends on who you ask. Lower oil prices have nothing to do with the many concerns about fracking raised by environmentalists. Those worries still exist.

See also: What Oil Companies Don’t Want You to Know

Additionally, low fossil fuel prices can make it harder for alternative energies to succeed. When oil is cheap, new energy sources like solar become less attractive and less competitive with gas. The result is that dirty fossil fuels remain entrenched against new, clean energy.

Sourceattn

Find us here

Get news from the CSGLOBE in your inbox each weekday morning

The views and opinions expressed in this article are those of the authors/source and do not necessarily reflect the position of CSGLOBE or its staff.

Paid content

Music conspiracy to detune us from natural 432 Hz harmonics?

Most music worldwide has been tuned to 440 hertz since the International Standards Organization (ISO) endorsed it in 1953. The recent rediscoveries of the vibratory...

6 Examples of Mainstream Media Manipulation

Is Everything in the Mainstream Media Fake? The world of television and modern media has become a tool of de-evolution, propaganda and social control. Since...

Rothschild & Rockefeller — Trillionaires of the World

Letter written from London by the Rothschilds to their New York agents introducing their banking method into America: "The few who can understand the system...

What's New Today

Georgia House Votes To Allow Citizens To Abolish Police Departments In The State

The Georgia House backed an effort on Friday to dissolve the Glynn County Police Department and any...

Leaked CDC document contradicts Pence claim that U.S. coronavirus cases ‘have stabilized’

Even as Vice President Mike Pence wrote in a Wall Street Journal op-ed published Tuesday that coronavirus...

Five bombshells about Trump from Bolton ‘s book

Excerpts from former national security adviser John Bolton ’s book about his time in the Trump administration...

Don’t Listen to Fox. Here’s What’s Really Going On in Seattle’s Protest Zone.

It seems I live in a city undergoing a “totalitarian takeover” that will lead to “fascist outcomes”...

MOST READ

What Is Agenda 21? Depopulation of 95% of the World By 2030

Most people are unaware that one of the greatest threats to their freedom may be a United Nations program which plans to depopulate 95%...

Alien Base for Giants Discovered in the Bucegi Mountains

In the summer of 2003, in an unexplored area of the Bucegi Mountains, a team from Zero Department (a top secret section of the...

Putin has Banned Rothschild and His New World Order Banking Cartel Family from Entering Russian Territory

As of recently, Russian president Vladimir Putin took yet another decision for his country. "Under any circumstances", the Rothschild family is banned from entering Russian territory. Along...

Music conspiracy to detune us from natural 432 Hz harmonics?

Most music worldwide has been tuned to 440 hertz since the International Standards Organization (ISO) endorsed it in 1953. The recent rediscoveries of the vibratory...

Fukushima Reactor #2 Pressure Vessel Breached, Rising To ‘Unimaginable’ Levels Of Radiation

Radiation levels inside a damaged reactor at the Fukushima Daiichi nuclear power station are at their highest since the plant suffered a triple meltdown...

New Alien Species Invasions Still Rising Globally

Up to 16% of all species on Earth could qualify as potential alien species and if they invade new regions, impacts will be difficult...

No Longer a Conspiracy Theory: Elite Openly Paying to Ingest the Blood of the Young

Once the talk of conspiracy theorists — the rich ingesting the blood of the young to foster longevity — is now a reality and...

US-Led Forces Now Using White Phosphorus in Populated Areas of Syria and Iraq

Iraq claimed credit for videos earlier this week showing the use of white phosphorus munitions in densely populated parts of the Old City in...

This One Photo of the Olympics Sums Up Everything Wrong With Society

The 31st Olympic summer games are underway in Rio de Janeiro, Brazil, and thousands of athletes and spectators from around the world have gathered...

USDA approves three new toxic meat preservatives

USDA caves to food industry pressures, approves three new toxic meat preservatives After intense lobbying by Kraft Foods Global Inc. and Kemin Food Technologies, the...

Anonymous Hits Federal Reserve

Hacker Group, Anonymous, Hits Federal Reserve As officials in Washington continue to discuss and warn about cyber-attacks, members of Anonymous claim to have breached a...