In case you haven't noticed, it is costing a lot less to fill up your car today, almost a dollar less than last spring. To understand this situation and why it may not last, a bit of history is necessary. Oil has driven, no pun intended, the transportation industry since the invention of the internal combustion engine, gradually replacing coal for ships and trains. The end product of gasoline combustion is carbon monoxide and carbon dioxide. Oil exists on six continents and probably on Antartica. America has produced large quantities of oil, but after WW II our oil needs increased as American took to the roads and suburbs. Dependence on foriegn oil grew. In 1960, an oil cartel formed called OPEC (oil producing and exporting countries). The twelve current member of OPEC represent the continents of Africa, Asia, and South America. Like any cartel, they set out to effect the price of oil based on production, much of which they controlled. By establishing quotas for each member nation no oil glut could occur. In 1973 due to America's assistance of Israel in the Yom Kippur War, OPEC established an embargo that lasted for more than a year. As a result the price of gasoline rose to over a dollar in the USA and congress passed a law that oil pumped in the USA could not be exported. This caused the volume of oil pumped in the USA to vary based on its price as oil is for the most part is fungible, though some is purer and easier to refine than others. Over the years, OPEC has managed to control its members, but cheating has occurred and once in a while OPEC has responded to outside political pressure, mostly Saudi Arabia and mostly by the USA, to pump more oil and lower its price per barrel. Saudi Arabia is by far the biggest oil producer, but Iraq, Iran, and Venezuela don't always agree with them.
In the 1980s a theory called "peak oil" was formulated. This theory stated that nearly all the deposits of oil worldwide had already been discovered and that we were going to run out of oil. Smart people like T. Boone Pickens and Warren Buffett both fell hook, line, and sinker for this theory that is almost as ridiculous as global warming. In the 2000s horizontal drilling and fracking, put "peak oil" in the garbage can. The USA has already become the leading producer of natural gas in the world and is on the verge of becoming the leading producer of oil. Sarah Palin was right and Obama was wrong. "Drill, baby, drill" was the correct choice, not "you can't drill yourself to prosperity." As you might have guessed, the same people including Barak Obama, who still believe in "peak oil" also believe in global warming. This is because they go hand in hand in harmful disproven theories that destroy the American economy (how Obama wants to fundamentally change America). Government loves for oil to cost more as it means higher taxes, but this is not very good thinking. It is said that the economy benefits by a billion dollars for every penny the price of oil drops. Drilling, shipping, pipelines, refineries, and all aspects of the oil and gas industries create jobs and growth of the economy which also means more tax collection.
But none of this explains what is going on with the current price of oil. Some will tell you there is a worldwide recession in the making causing oil needs to slow down, but that is not really the whole story. China, for example, that had a slow down is cranking up again. One other factor that affects the price of oil, is the cost of bringing it to the surface and to a lesser extent the quality of the oil as "dirty" oil costs more to refine and less of the barrel is able to be refined. Saudi Arabia has some of the lowest costs for pumping oil out of the ground. Fracking, horizontal drilling, and deep water drilling cost much more. The Saudis want to retain their position as the leading oil producer in the world, so they have flooded the world with cheap oil. American oil production has slowed in response to the Saudi tactic. Fortunately this cannot go on forever, only for as matter of 6 months or so, because OPEC profits are used to finance their countries so their people will suffer. This also effects non OPEC oil producers like Russia, as they have to drop what they charge.
Governments plan their budgets ahead of time and base spending on the income they think they will garner. Several OPEC members, Venezuela, Iran, and Iraq are currently suffering and Venezuela may default on its international debts. Russia is in a recession, as much of its hard currency is from oil and natural gas exports. The price of oil will increase because of pressure from some of the OPEC members to slow production.
Obama looks at the price of oil, high or low, as a win-win situation. If oil prices are high, it slows the American economy that to Obama is a good thing as it fits in very well with his plan to collapse the American economy. If oil prices are low, then he can claim the credit, which, of course, is not true. Our economy has been slowly improving despite his attempts to destroy it. The regulation furor, that has characterized the regime, is in response to the resilience of the American people and our economy.
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