Economic perfect storm undercuts oil prices
As the sharp drop in crude oil prices continues to send economic shock waves around the globe, American consumers are reveling in some of the lowest gasoline prices in years.
AAA reports the national average price for a gallon of regular gas is $2.60, a low not seen since December of 2009. And while the organization had been forecasting a national average gas price of $2.50 per gallon by Christmas Day, it's now saying that milestone could be reached even sooner than expected.
"Gas prices will continue to be in free-fall, as long as crude oil is searching for a bottom," AAA said in statement on Friday.
The transportation group estimates that U.S. consumers are saving a total of roughly $375 million per day -- or an average of about $100 per household -- compared to the spring and summer, when fuel consumption was at its peak.
For now, those savings are likely to grow. Benchmark U.S. oil prices, which are down more than 40 percent since June, continued to sink, with West Texas Intermediate crude falling on Friday to less than $58 a barrel. That is the lowest level since 2009. Brent crude finished at less than $62.
Burgeoning oil production, led by shale operators in the U.S., isn't the only factor weighing on energy prices. In much of the world, demand is dwindling as economic growth slows. The International Energy Agency cut its outlook for global oil demand in 2015 to 900,000 barrels per day, a reduction of 230,000 barrels per day.
Several factors are damping global oil demand. The rise in global oil supplies is coinciding with a slow global recovery from the depths of the Great Recession. At the same time, China, the globe's biggest overall energy consumer and one of the largest net importers of oil, is experiencing a sharp pullback in growth.
In Western Europe, which is still dealing with an ongoing and economically devastating debt crisis, officials consider the tumbling oil prices a mixed blessing, at best.
"It's hard to identify the primary cause of the fall in oil prices -- the increased supply or the weak demand," Peter Praet, a member of the European Central Bank's executive board, said during an interview in late October.
"It would of course be serious if prices were not pushed down by low demand. Cheaper oil supports growth but also threatens to drag inflation expectations down too far," he added.
BP (BP) recently said in a report that global energy demand is slowing, even as that demand increases in emerging economies. According to the oil giant, worldwide energy consumption is expected to rise 41 percent between 2012 and 2035, compared to a 55 percent increase over the last 23 years.
"Among today's energy importers, the United States is on a path to achieve energy self-sufficiency," the report notes, "while import dependence in Europe, China and India will increase."