So it’s not a demand issue … it’s actually a supply glut. According to a JP Morgan study, global oil consumption has increased 4.3 percent since 2013. But global supply has grown an outsized 5.4 percent during that same period of time. The U.S. fracking revolution has increased oil production here in the States by a whopping 19 percent, while OPEC continues to grow its production despite cratering oil prices. Russia, the Middle East, Brazil and most oil producers around the world are bleeding money. And numerous studies project that if oil stays this low for much longer, as much as 30 percent of U.S. energy exploration firms could be out of business by 2017.
How does this affect us?
If it were time for us to head to Michigan now, we’d be much more likely to load up our gas-guzzling SUV (and soon-to-be four children) to make the drive. You may do the same thing next time you’re on the fence between driving and flying. So imagine this, oil stays lower long enough to put a third or more of energy producers out of business. Supply drops, but we’re still consuming the same amount of gas as we’ve gotten even more accustomed to hitting the highway. This is when gas prices will level off and start to head higher once again.
So enjoy your now affordable road trips while you can. Because as an old oil adage goes, “the best cure for low oil prices is … low oil prices.”