Oil prices are down sharply this year, losing over 30 percent of their value since hitting a summer peak. In fact, prices have fallen by one-third since mid-summer due to oversupply. Oil prices are at five-year lows, with some barrels exchanged as low as $67.26. But, the question begging to be asked is: Why? What is driving down the price?
The majority reason of why is that:
"Put simply, global oil supplies are exceeding demand and driving down prices in the process. A major factor has been the explosion in U.S. oil production, which is up to almost 9 million barrels per day and expected to hit the highest levels in four decades next year.
"Another factor is the struggling economies in Asia and Europe leading to a decrease in oil consumption. China, one of the world’s largest oil consumers, has seen its economic struggles result in its demand for oil being outpaced in Asia by India, a country that has also struggled financially of late. Saudi Arabia also cut the price of its own crude to the U.S. earlier this month, which has further propelled the sell-off.
"Meanwhile, oil futures were hit especially hard late last week by a decision by the Organization of Petroleum Exporting Countries (OPEC) not to adopt additional measures to tackle oversupply issues. OPEC, the cartel responsible for one-third of global oil production, said it would keep its self-imposed output ceiling at 30 million barrels per day. The announcement subsequently sent already-low oil prices down even further as OPEC’s maintained quotas will do nothing to lower overall oil output to a point that is consistent with global demand for the cartel members’ oil, which the International Energy Agency estimates at just above 29 million barrels per day for next year." http://fortune.com/2014/12/02/oil-prices-us-energy/
The big question, though, is how does this affect YOU? The good news is that cheaper oil will result in cheaper fuel costs, including diesel. According the AAA the average price of gas is under $2.75/gal; however, that drop in price won’t be matched by diesel fuel for a while still, with the inclement weather bringing colder temperatures and a need for fuel additives. Additionally, diesel fuel is taxes are considerably higher than gasoline prices, which also means that it is unlikely that diesel prices will fall below gasoline prices; however, lower cost per barrel of oil will impact, and reduce, the cost of diesel in the near future, if the falling trend in oil barrel price continues.