Motorists everywhere are enjoying the continually plummeting gas prices.
But just why are we seeing prices that have not been this low since 2009?
The short answer is supply. There is more crude oil than is required at this point in time.
This over abundance would usually be met with a lessening in crude oil production, thus balancing the supply with the demand.
This, however, is not happening at present.
OPEC, the Organization Of Petroleum Exporting Countries, has decided to continue to flood the market and stick to their daily target of 30 million barrels of crude oil production.
OPEC, which produces about 40% of the global supply of crude oil, has refused to limit the total production in spite of urgings from some of its member nations.
Among the nations that urged the Organization to take action were, Venezuela, Iraq, and Iran.
Why has OPEC decided on this course of action?
The U.S. is at a 30 year peak of crude oil production, thanks largely to a boom in fracking for shale oil.
Some estimate the U.S. is adding 2 million barrels a day to the global supply.
This is lowering demand for OPEC sourced oil and therefore has forced them to lower their price in an attempt to keep their market share.
OPEC’s share of the global market is at a 25 year low according to its internal forecasts.
Shale oil production is expensive, more so than the traditional methods used by OPEC.
The hope is that by lowering the price of crude oil, the U.S. will be forced to cut its production and therefore alleviate the threat to OPEC.
Of course, there is no way to know if this scheme will indeed force the U.S. to limit its stake in the global market.
Many of the twelve OPEC member nations are not happy with this particular plan, and are requesting that oil prices be protected.
On the consumer end, we could continue to see even lower prices as this struggle for dominance continues.
My advice is to enjoy it while it lasts, as history proves price drops like this are not permanent.