As Oil Prices Fall, Who Wins And Who Loses?
U.S. Production: Despite soft demand, U.S. oil production is rising again this year due primarily to hydraulic fracturing, or fracking. The U.S., which became the world's largest natural gas producer in 2010, is now the world's largest oil producer this year, surpassing Saudi Arabia this year and pumping around 11 million barrels a day.
The average U.S. gas price is at $3.17 a gallon this week, down around 15 percent since June, according to GasBuddy.com. The lower price at the pump effectively serves as a stimulus for consumers that can encourage increased spending to stimulate the economy.
"It's quite possible that Christmas shopping will be much better this year because consumers will be spending less for gasoline," economist Philip Verleger told NPR's Morning Edition.
While lower energy prices benefit most of the country, it could deliver a blow to oil producing states like Texas, Oklahoma and North Dakota. If prices go down and stay down for an extended period, energy companies could cut back on production and investment.
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The Global Economy: Lower gas prices are a small consolation if accompanied by a sluggish world economy, and that's what many economists are forecasting. In Europe and Asia, most of the major economies have low or slow growth compared to recent years.
China and India, which were gulping down imported oil as their economies raced ahead, have both seen slowdowns. The lower oil prices will help keep their manufacturing and transportation costs down, but that alone is not enough if the rest of the world is less interested in buying their exports.
Of course, oil prices could reverse direction swiftly and dramatically as they have many times in the past. Small shifts in world oil production, currently around 92 million barrels a day, often lead to major swings in prices. If, for example, Saudi Arabia chose to cut production or the fighting in Iraq shut down its oil fields, prices could head north in a hurry, according to analysts.
Greg Myre is the international editor of NPR.org. You can follow him @gregmyre1.
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