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Falling Oil Prices: Implications in the United States

Falling Oil Prices: Implications in the United States

Full Title: Falling Oil Prices: Implications in the United States
Author(s): Stephen Brown
Publisher(s): Resources for the Future
Publication Date: January 1, 2015
Full Text: Download Resource
Description (excerpt):

Although they have increased since hitting bottom in January, world oil prices are nearly $50 per barrel lower than in June 2014 as of this writing in March. The futures market shows the drop will be sustained but with gradual increases over the next five years. The decline in oil prices is the result of both weak demand and increased supply. World oil market participants gradually realized that weak economic activity in China, Japan, India, and Europe lessened oil demand. At the same time, the world oil market saw growing supply, particularly from US shale oil production.

As a result of lower crude oil prices, US gasoline prices were lower in January 2015 than they had been in more than six years. With crude oil prices rising and recent disruptions in US refinery operations, however, gasoline prices have risen by about 50 cents per gallon since January, with seasonal gains of about another 20 cents per gallon expected by Memorial Day. Despite the recent gains, oil and gasoline prices remain well below their mid-2014 values, and those lower prices should prove a mild stimulus to US economic activity, although the economic effects are likely to be uneven across the country. Energy security may be reduced, and oil-related pollution is expected to increase.

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