Gas prices are already lower than they have been in years. The price of crude oil currently stands at $50 a barrel, which is half the cost of their peak price of $107 in June of 2014. But that price is expected to drop even lower within the year, possibly as low as $10 to $20 per barrel.
According to Yahoo News, the cause of the plummeting gas prices are the result of slow economic growth in the United States, which has averaged 2.3 percent a year since the start of the 2009 recession recovery. This blended with the slow economic growth elsewhere in the world and the increase in U.S. gas mileage allows for weak global demand for oil, and that demand is decreasing even further.
However, oil production is only increasing thanks to major fracking and drilling efforts by the United States. Output of oil increased by 15 percent within the past year, but imports declined by 4 percent. Low demand and high supply causes gas prices to drop significantly, and it’s only going to go lower. Record-low gas prices might seem like a good thing, but they could spell disaster for the global economy in the long run.
American financial analyst Gary Shilling has predicted that gas prices will sink as oil decreases to $10 a barrel, according to Business Insider. You can track the cost of oil and diving gas prices in the graphic below, showing a sharp decline since late 2014.
Shilling wrote an opinion piece at Bloomberg View about the distressingly low price of oil, citing low demand and high supply as the major cause.
“U.S. crude oil production is forecast to rise by 300,000 barrels a day during the next year from 9.1 million now. Sure, the drilling rig count is falling, but it’s the inefficient rigs that are being idled, not the horizontal rigs that are the backbone of the fracking industry. Consider also Iraq’s recent deal with the Kurds, meaning that another 550,000 barrels a day will enter the market.
While supply climbs, demand is weakening. OPEC forecasts demand for its oil at a 14-year low of 28.2 million barrels a day in 2017, 600,000 less than its forecast a year ago and down from current output of 30.7 million. It also cut its 2015 demand forecast to a 12-year low of 29.12 million barrels.”
If gas prices do continue to drop, who will benefit from the cheap gas and who will suffer? A previous report from the Inquisitr explains how the low gas prices could be dangerous.
Are you happy about low gas prices? Or would you happily put up with high gas prices for the sake of the economy?