Price of Oil Hits Five-Year Low

Dec 16, 2014 at 5:18 pm |
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A pipeline carries oil September 20, 2000 at the Federal Strategic Petroleum Reserve facility.

A pipeline carries oil September 20, 2000 at the Federal Strategic Petroleum Reserve facility. (Photo by Joe Raedle/Newsmakers)

The price of oil seems to keep plummeting. It is currently around $56 a barrel.

This is good news to many Americans. The more money saved at the pump, the more money in your pocket. This is good news for the economy as well.

In June, the price of a barrel of oil was roughly $115, and it has been falling since. On November 27, the Organization of Petroleum Exporting Countries, or OPEC, failed to reach an agreement on production curbs. This has caused the price to tumble.

One of the largest oil producing countries, Saudi Arabia, rejected production cuts. Saudi Arabia feels that rather than cut production (and thereby lose revenue), they will let the higher cost of production lower the supply. The country also insists that other countries who aren’t a part of OPEC make production cuts.

But in the Western Hemisphere, the U.S. is dominating in oil production, now ranking at No. 1. Also, the production of other fuels, such as natural gas, is lowering the price of oil. All of this is coinciding with a low global demand because of weak economic activity, increased efficiency, and the use of other fuels.

So all of these factors are playing a role in the price drop at the gas stations. The national average at filling stations currently stands at $2.53 for a gallon of regular.

The price of oil keeps dropping. But why?