We can’t stop talking about oil. Every day it seems we hear about prices, production, and of course the end result – paying less at the gas pump. And that’s great news for most Americans. Last year oil prices had their largest annual drop since 2008. Why? To me, it comes down to supply and demand. And frankly, I think it’s capitalism at its best.
There is simply global supply glut right now. Its slowing demand from China, and part of the abundance is due to our own domestic production.
In the past, OPEC has cut output to keep prices up. But they’re reluctant to do that now because they fear U.S. competitors will fill market share. So it’s no surprise the 2015 oil forecast points to growing inventories and falling prices.
It’s been said that U.S. consumers have saved $14 billion at the pump. That’s $44 for every person nationwide, or $115 per household. Those numbers will grow if the forecasts are correct - AAA is predicting $50-75 billion in total savings, or nearly $600 per household.
While there could be a short-term increase in gas prices due to refinery maintenance season, overall the prices are low, and collectively our wallets are a little fuller.
Again, that’s fantastic news for most Americans…most.
Lower demand is not good for businesses, and oil refineries are no different. The current oil situation, while great for consumers, is not so great for the 16,000 laid off employees of Baker Hughes and Schlumberger.
So we’re seeing the “yin and yang” of economic activity. When things are good for most, they’re not necessarily good for all.