Oil Prices and their Affect
on the Market
Consumers have found a few extra dollars in their monthly budgets as the drop in oil prices has helped ease the burden of high gas prices. Increased domestic and OPEC (Organization of the Petroleum Exporting Countries) production and softening demand have helped move the price of gas downward.
The price of West Texas Intermediate crude and Brent crude fell more than 9 percent during November. U.S. production has been a shining light in an era where we have seen sky-high gas prices. With U.S. production, the peak in April has dropped, but not at the pace that many analysts expected. This has helped to force the OPEC producers to keep their production levels high.
Last year, the increased production in the U.S., helped to create an environment of over-supply, which in turn brought prices down. Prices are now near six year lows. At the same time, the number of oil drilling rigs in the U.S. has been dropping since 2010.
While low gas prices have helped the motoring public, the same drop in the cost of a barrel of oil has hurt some industries as well as whole countries. Oil producing companies, and countries like Russia that can't profit on oil under $100/barrel, are on the flip side of the low price equation. The stock holders in oil companies are hurt by the low prices also.
Keeping Prices Low for the Short Term
OPEC has said that it would not unilaterally cut back on the output of oil and let the market set the price. In the low 40-dollar range, oil is cheap and the price at the pump has been a source of savings for consumers.