The good news is that it’s been a year since the price of gasoline hit the skids. The even better news is that the price could stay down there for a long time. The oil “freight train,” as it’s called, is on a roll, and OPEC is on the ropes. American industrial ingenuity is taking consumers past the obstacles to affordable fossil fuels, including the obstacles President Obama throws down. In an era in when economic struggle seems to be the new normal, cheap gasoline is the one bright spot.
The average price of unleaded regular gasoline at the pump is $2.58 a gallon — 26 percent less than a year ago, as calculated by the American Automobile Association’s Fuel Gauge Report. In several low-tax states like South Carolina, gasoline averages less than $2.20 a gallon and could fall below $2. In tax-happy states like California, drivers are still suffering self-imposed pain at the pump, at $3.56 a gallon.
The price at the pump has followed the price of crude oil on a downward spiral. International benchmark Brent crude has fallen from $115 a barrel in June 2014 to its current level below $50. A struggling global economy is partly responsible for slowing the demand for oil, and the success of hydraulic fracturing, or fracking, to tap heretofore unreachable shale-based deposits has boosted supply. Amidst the market upheaval, Saudi Arabia has conducted a price war to drive the U.S. oil industry underwater, to recapture the market dominance that Americans won last year.
It hasn’t worked. Though the war has forced a decline in the number of operational U.S. oil rigs, from 1,608 to 664, fracking has led production to climb to its highest mark in 43 years. “The freight train of North American tight oil has kept on coming,” Rex Tillerson of Exxon Mobil tells Ambrose Evans-Pritchard of the London Daily Telegraph. The Saudis are considering borrowing $27 billion to balance their budget, but they’re still pouring their cash reserves into the domestic economy to make up for declining oil sales. The sandworm has turned.
President Obama gets no credit for the good fortune of American consumers. His stubborn opposition to the Keystone XL pipeline from Canada to the Gulf will surely persist, though his preference for green energy has not yet persuaded him to swap his gasoline-guzzling presidential limousine for a modest plug-in electric. He disappointed allies in the labor unions by keeping the ban on exporting American crude oil. Lifting the ban might make the price of gasoline to fall further.
Some legislators across the land are dizzy from the fumes of abundant gasoline. In July, legislators in the state of Washington approved an 11.9 cent a gallon gasoline tax increase on top of a 55.9 cent state tax. In Washington, D.C., however, Congress resisted the proposal to raise the 18.4 cent a gallon federal gasoline tax to replenish the depleted Highway Trust Fund.
Politicians who regard pennies as pocket trifles should remember that each additional penny in gasoline tax siphons $1.5 billion from the economy, money that won’t be spent on other necessities like food and clothing. Retrieving some of the savings that consumers got from the cheap oil, while suffering through years of flat wages, would be heartless indeed. The days when OPEC had America over an oil barrel are long gone, and that’s good news in red, white and blue.
(via: Washington Times)