As of recent, the prices of gas have been drastically dropping. Why does this matter to Rangeview Students? Well, the most obvious reason is because if gas is more affordable, students are able to drive more places; though, it’s also important because students in high school are the future of the country. The reason that gas prices are dropping, and the impact it’s having on the country, is a large and very important issue. In order to avoid any sort of negative blowback, it’s important for the future of the country to understand the issue.
To explain why gas prices are so low in the simplest terms, it is because there is currently a lot of oil on the market. Most of which is being produced by the United States. Over the past couple years, The U.S.A has gone from being nearly completely dependent on oil imports, to becoming the largest oil producer in the world (Institute For Energy Research, 2014). The reason for this drastic change is twofold: hydraulic fracturing and drilling in the Gulf of Mexico. Hydraulic Fracturing is a new and controversial method of retrieving oil from the ground by opening up fractures in the earth’s surface by pumping water, sand, and a mixture of chemicals into the ground at high pressures (this method is only controversial because fracking could possibly be causing earth quakes in the regions it’s being used, but that’s a separate issue). Also, the amount of drilling The United States has done in the Gulf of Mexico has sky rocketed in recent years – due to a lack of hurricane activity in the region that’s made it safer for oil rigs.
The reason gas prices are dropping is very simple, it’s the effect it’s having that’s complicated.
According to many economic specialists, the drop in gas prices, which has been labeled as “The Gas Crisis”, has been just short of severe. The drop in gas prices is leading to a drop in profits by the oil Companies, and therefore leading them to lay people off due to an inability to support their wages. This is especially bad because about 215,000 jobs are housed within the oil Industry. These are jobs that average about $23/per hour, with about a 45 hour work week. About 23 out of the 50 states have jobs in this field. (Bureau of Labor Statistics, May 2013)
According to CNN Money, The Wall Street Journal, among other financial news outlets, Low gas prices are good in the short term, but not so good in the long term. For now, they will cause a spike in consumer spending, and more money being spent means more money in the economy. Though once this adrenaline shot to the economy wears off, America will start to feel the negative effects of the drop in gas prices (such as the loss of jobs in the oil industry).
Though, that long term affect is only for the United States, there is also a larger global impact. Countries dependent on oil exports could experience a slowing economy, or even fall into recession. Countries like Nigeria, Russia, or Saudi Arabia, will feel the impact the most. Though Saudi Arabia has a very strong economy at this point, so they are likely to be able to ‘ride out the storm’. Russia and Nigeria, on the other hand, are currently facing economic issues and will not be able to handle the situation like Saudi Arabia will. For example, currently 64 rubles (The Russian Currency) are worth exactly one American dollar. Comparing this to the 2012 price of only 28 rubles to one American dollar, you can see how the drop in gas prices is leading to this drop in the worth of their currency, and therefore leading to inflation in the Russian Economy.
The only reason it will have such a negative effect on the world economy, is because of OPEC’s refusal to regulate production of oil in other countries. Though if one were to put themselves into OPEC’s position, this is understandable; because it’s not fair for the oil producing countries to be regulated, and not the United States – considering the United States is the country that’s flooding the market. Though it’s not all the United States fault either, it’s a large complicated problem and no one country or organization is at fault. All that can really be said is that oil is a non-renewable resource. It will eventually run out. This drop in prices should simply serve as a reminder that we, as a country, should focus more on becoming less dependent on oil, less on acquiring more. Companies like Tesla Motors are pioneering in new and innovative ways to power cars with electricity, but without consumer support, they may not be successful.
