The fall of oil and natural gas prices is a boon to U.S. consumers and the economy. Americans should enjoy the break while it lasts.
Lower prices at the gasoline pump and in utility bills puts more money in everyone’s pocket, which boosts spending and the overall commerce. Considering the slow pace of America’s economic recovery, the market needs all the help it can get.
The drop in the world price of oil is due to several factors related to supply and demand. One is that the demand from China, which had been strong, is now lagging, a result of its own economic slowdown. Another factor is that the big producers, including Saudi Arabia and now the United States, have not reduced production, for different reasons.
The 12-member Organization of Petroleum Exporting Countries, a villain in past decades, has lost much of its punch as individual producers have been unwilling to cut production to influence the world price. Chief among the cartel members is Saudi Arabia, which pushed production to record levels last month to maintain its spending on, among other things, weapons and benefits to its people. The aging monarchy faces threats from various sources, including Islamic radicalism opposed to the ruling family.
In the United States, companies drilling for oil and exploring deep gas deposits made the country a new leader in production. While slipping prices have curbed some new exploration for wells, it has not changed the fact that record U.S. oil extraction has slashed dependency on imports.
The countries that have taken a licking on the world market are smaller producers such as Iran, Iraq, the Persian Gulf states, Nigeria, Russia and Mexico. Venezuela recently called for an emergency OPEC meeting on the plunging prices.
In the meantime, U.S. drivers, homeowners and businesses should take advantage of the situation. No one knows when prices will turn back up.
Editorial by the Pittsburgh Post-Gazette
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