Be Smarter At Happy Hour: Why is gas cheap AF?

ROOOOADTRIPP!! Over the past 18 months, oil (and therefore gas) prices have dropped faster than you can say “Tiddlywinksonacid,” or in other words, the complete opposite of Powerball jackpot fever. From a Summer 2014 high of over $100 per barrel to around $30 today, black gold has taken a polar plunge of over 70 fucking percent! To put that into simpler terms, gas prices have dropped from roughly $3.68 per gallon to under $2.00 on average in that same time frame with states like Texas hovering around $1.60. Hook ‘em!

While that is seemingly good news for cube monkey’s hitting the roads for work, it’s had a pretty big impact on local and state economies where energy is king. Areas such as Texas, South Dakota and all the way up to Alaska are reeling from job losses and revenue haircuts that are affecting their communities. Not to mention the stocks of familiar faces such as ExxonMobil, Halliburton, Schlumberger and Chevron have taken a beating worse than what the Taliban gave Bowe Berghdal. In fact, approximately $320 BILLION is projected to disappear from oil budgets. That’s enough to make that Powerball jackpot blush. While lower gas prices have put money back into our pockets, our personal and retirement portfolios have taken an even greater hit (Yours Truly included).

Time to edg-a-mah-cate you guys. Here’s why oil prices have plunged:

  • Fuckin’ OPEC: You’ve probably heard the name before and just associated them with “that Middle East oil thing”…and you would be right. However, they control a good portion of the world’s oil reserves and right now they are flooding the market in an attempt to hijack market share and squeeze out high cost producers *cough, cough* America *cough, cough*. Recently, there has been some tension within the cartel as higher cost producers like Nigeria and Venezuela beg the Saudis to cut production and keep the price of oil higher so that their economies can stay afloat. In fact, Venezuela is extremely likely to default in the upcoming year and can’t even afford to import basics like milk and eggs . So far, it looks like the Saudis are winning the battle as OPEC continues to pump at record levels
  • United States: We as Americans are stubborn. We know there is a supply glut in the market but we continue to pump. It’s moreso a game of chicken at this point between OPEC and the US producers. The US is producing at record levels due to the shale boom started by new technologies like fracking which are highly controversial given their environmental impact. At the same time, our currency is putting a beatdown, like Holly Holm did to Ronda Rousey, on the rest of the world’s currencies. Oil trades in Benjamins so the cost is continually on the rise for overseas buyers. On the flip side, great time to take that backpacking trip through Europe!
  • China: Unfortunately, it appears they can make iPhones quicker than they can grow their economy. If there is a slowdown in the Chinese economy, as is suggested by their stock market needing to initiate circuit breakers to prevent their markets from crashing twice a few weeks ago, then they clearly don’t need as much oil. This in turn would create even more oil reserves and drive the price down even lower.
  • Iran: I’m sure you have heard by now about the nuclear deal Obama signed with Iran lifting oil export sanctions in exchange for a shutdown of their nuclear program. If you haven’t, please get out from that rock you’ve been living under and read something besides Yahoo! news. Anyways, Iran is coming in uranium hot and is close to meeting it’s obligations and the first thing they are going to do is of course PUMP, BABY, PUMP which will flood the markets with you guessed it…even more oil.

While it seems all doom and gloom for the energy market and companies that operate in the sector, the slightest bit of good news on China’s economy, OPEC’s cutting production or even our favorite Somalian pirates creating chaos in region, the price of oil could shoot up just as quickly as your local heroin junkie. I guess what I’m saying is take that cross country road trip, travel to Europe or buy some oil futures expiring in 3 years.