As the price of crude oil continues its downward trajectory, consumers enjoy a break at the pump, while major oil producing countries and companies sweat over the loss of revenue and the new normal in the global oil market.
Assistant Editor
In 2014 the world saw the beginning of a steady decline in oil prices, the outcome of which has yet to be determined. In July of last year oil hovered around an average price of 107 USD per barrel, and six months later prices dropped 50% to under 50 USD per barrel. New technologies like hydraulic fracturing (“fracking”): the forcing open of fissures in rocks below ground by introducing liquid at high pressures, are seen as reasons for the decline. It is actually old economic fundamentals of supply and demand, and the protection of market share that bear the main responsibility for the fall in prices.
While discussing the global oil market with the Middle East Economic Survey, Saudi Arabian oil minister, Ali al-Naimi commented that "oil 'may not' trade at 100 USD again," while also adding that "it is not in the interest of OPEC [Organization of Petroleum Exporting Countries] producers to cut their production, whatever the price is."
For the average U.S. consumer, economists argue that the fall in prices at the pump is a de facto raise for the American middle class, allowing large portions of wages to be spent on consumption. However, the oil and gas industry has also been crucial to American high quality jobs in the energy sector. The recent fall in crude oil prices is anticipated to slow the accelerated pace of job creation Americans enjoyed in 2014.
In the Middle East, the fall in oil prices has caused alarm for oil-producing countries whose budgets are dependent on high oil revenues. In Persian Gulf Arab states, budget shortfalls have raised the possibility of a decrease in subsidies for gasoline, water and public housing. Increases in government spending that were promised to citizens to quell demands of the Arab Spring may now have to take a back seat to a petrol price war that has no end in sight; a price war that students at the University of Houston-Downtown welcome with open arms.
As students gear up for the new semester, the drop in oil, most notably gas prices, has come at the perfect time. There are books to be bought, parking passes to be paid for and an array of other expenses that go along with attending university. Lucky for students, the Saudis intend to protect their market share at all cost, and we do not mind letting them.