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Five Reasons for Lower Oil Prices

All corners of the globe are contributing to the recent dip in oil prices.
November 3, 2014

​BOSTON – Oil prices have collapsed over the last several months, and some analysts say they could go even lower. So, what's behind the plunge? A variety of factors have coalesced into a perfect storm driving oil prices lower and lower, says a recent article in the Christian Science Monitor.

But the global oil market is unpredictable, and dependent on a variety of factors.  For now, that imperfect market is a boon to U.S. motorists, who are enjoying the lowest gas prices in years. And those savings could translate into increased consumer spending in other sectors. Low gas prices have a downside, though, encouraging increased gasoline consumption and the purchase of larger, more inefficient vehicles.

Falling crude prices also threaten oil producers in Texas and North Dakota, where the cost of extracting hard-to-reach oil from shale is high. Oil producers in those regions are already cutting rig counts – worried that if crude prices dip too low, wells won’t turn a profit.

Abroad, Venezuela, Russia and other petro states are wringing their hands as well, watching nervously as prices plunge. Those oil-dependent governments rely on high-priced crude to round out their budgets, and falling oil revenues mean they’ll have to curb their government spending.

Here are five main causes contributing to falling oil prices, according to the Christian Science Monitor:

  1. U.S. oil production is booming.
  2. Saudi Arabia isn't budging.
  3. Asian demand has dropped off.
  4. The U.S. dollar is strong.
  5. Libya and Iraq are back.