December 12, 2014 admin

Why Are Oil and Gasoline Prices So Cheap?

crudeAmerica’s natural gas shale boom has taken off in an amazing way allowing for ridiculous amounts of cheap clean energy to flood our country.

The natural gas commodity is taking over the coal industry in large measure and this all happened from a couple decades of private sector and some government financed research in the art of extracting this trapped gas from shale rock.

This phenomenon has caused a lack of dependence on OPEC oil from the mideast as we are producing quite a bit in America on our own.

We are using oil and natural gas and not importing as much from other countries.

Electricity rates in Texas are fairly low in price because we generate most of our electricity using natural gas.

To compete with America’s rich abundance of cheap energy OPEC has been forced to lower the price of their oil.

Just recently a barrel of oil fell under $60 a barrel in price and this trend may continue on below $40 as OPEC tries to compete with who was once their largest importer.

Unfortunately, frackers and all those jobs created from fracking may be hit hard by these cheap oil prices as gas grows closer in parity to other fuel prices.

Consider this quote from the Economist regarding oil prices and the ramifications of lower prices:

“The main effect of this is on the riskiest and most vulnerable bits of the oil industry. These include American frackers who have borrowed heavily on the expectation of continuing high prices. They also include Western oil companies with high-cost projects involving drilling in deep water or in the Arctic, or dealing with maturing and increasingly expensive fields such as the North Sea. But the greatest pain is in countries where the regimes are dependent on a high oil price to pay for costly foreign adventures and expensive social programmes. These include Russia (which is already hit by Western sanctions following its meddling in Ukraine) and Iran (which is paying to keep the Assad regime afloat in Syria). Optimists think economic pain may make these countries more amenable to international pressure. Pessimists fear that when cornered, they may lash out in desperation.”

Regarding the success of natural gas fracking in the US consider this quote from Bjorn Lomborg:

“The biggest U.S. environmental impact of the Obama era is the one that nobody (not the president, not Congress) envisioned. It is the shale gas revolution that was made possible by the United States spending $10 billion on R&D to develop hydraulic fracturing over the past 30 years.

Over the past five years, this investment has made gas much cheaper, allowing a significant shift in electricity production from coal to gas. Since gas emits less than half the carbon dioxide per energy unit than coal does, this means that in 2012, when adjusting for more wind and lower economic output, the gas switch reduced U.S. emissions by about 300 million metric tons of CO2, causing emissions to hit lowest level since 1994. At the same time, it is estimated that the economic benefit to the United States is about $283 billion per year. This compares favorably to all of Europe’s wind and solar energy, which reduces CO2 emissions by about 91 million metric tons and cost about $40 billion annually.”

About the Author

admin Donny started back in 2007 from his parents basement and has since married his wife Melody and had three sons, John Adam (7) and Noah (4) and our new 20 month old son. He enjoys tech related things, softball, kickboxing, going to the gym, excursions and activities together with his wife Melody. Our service allows you to shop and compare commercial and residential electric rates and providers. Would you take the time today to try our service and see how you like it. Thank you! and God Bless You!

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