Supply is a major reason why gasoline prices are dropping. Supply refers to the amount of a good or product that exists. The biggest change in supply in oil and gas production is coming from America. The United States is currently producing oil and natural gas at a 28-year high. In 2000, the United States produced about 16 million barrels of oil a day. Today, it is producing 23 million barrels a day. Most if not all of this production is coming from privately owned land in America. The Bakken oil field in North Dakota and the Eagle Ford shale formation in South Texas are both producing large amounts of barrels a day. New technology and ingenuity has allowed for greater oil production in America.
A second reason for the drop in gas prices is the shift from the summer blend of gasoline to the winter blend. The winter blend of gasoline is cheaper to produce and it also costs less to buy. Over the last three years, gasoline prices have dropped an average of more than 30 cents a gallon. However, with the combination of the huge glut of American oil, it is almost expected the national gas price will be below $3/ gallon.
The drop in prices is not seen as good by all. Of course, the American public love the lower gas prices. It is easier paying $60 to fill up instead of $85. However, many countries rely primarily on high gas prices to meet their budget needs. However, OPEC (Organization of the Petroleum Countries) and Russia rely heavily on their selling oil and gas at higher prices. Because of this, the OPEC members and Russia will struggle this year, and perhaps in the near future, to keep up their activities as they have been used to.
OPEC countries: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Venezuela
1. How does your family view the lower gas prices?
2. Do you think it is in the United States of America’s best interests to pursue more production of oil and gas? Explain.
3. How would a weaker Russia affect international politics? (See the current event on Ukraine)