Marita Noon: The oil price election connection

Commentary by Marita Noon - After years of rising gasoline prices, people are puzzled by the recent drop that has a gallon of gas at levels not seen in nearly four years. Typically in times of Middle East unrest, prices at the pump spike, yet, despite the violence in Iraq and Syria, gallon of gas is now at a national average of $3.
      The public hopes it will last. The oil industry can’t afford continued price suppression. I believe the price will tick up in the days ahead (post-election)—which will make it economic for producers to continue to develop—but the increases will not be so dramatic as to take away the economic stimulus the low prices provide.
      Experts call the low cost the “equivalent to a tax cut averaging almost $600 for every household in the U.S.” while it boosts our gross domestic product by 0.4 percent. Consumers surely welcome the reprieve. But why now and why won’t it last?
      As gasoline prices have made headlines, several narratives are repeated. Generally the explanations revolve around two basic truths—but, as we’ll explore, there is more.
      The reasons offered for the drop in prices at the pump (which reflects the price of a barrel of oil) are 1) increased North American oil production and, 2) sluggish economic growth in Europe and Asia—which together result in a surplus, or a global glut, of oil. Read full column


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