The Main Reason for the Dropping Gasoline Prices - Essay Example

            In the past few months, the United States has enjoyed record low gas prices. By January 23, the price per gallon was $49. This is almost half the price from June the previous year which was at $115 per gallon (Plumer 1). The drastic price changes have been a global experience the global fuel prices are on a steady decrease. In an argument by Plumer, the world has seen a decrease in fuel changes drastically as main producers of oil have quoted minimal prices as compared to a year back (1). What has been the main reason, for the price change?

Increased Supply of Crude Oil

            The first reason for the decreased price is the decreasing oil demand based on that numerous countries have been developing oil reservoirs that can sustain their internal industry. In the United States, the production of oil has increased significantly since 2008. The increase has been influenced by the more advanced drilling in the Gulf of Mexico. Oil production from the United States has increased the supply to the international market. In addition, different from oil from the Middle East, the price for American Oil is relatively cheaper (Plumer 1). This is based on that the United States has decreased its purchase level of expensive international oil. The impact of the strategy has been consumer-friendly.

            In the global market, with more oil from the United States and other suppliers the supply is relatively high. This decreases the monopoly of production in the Middle East (Plumer 1). Moreover, with high supply, the demand for major oil producers decreases. To sustain their production, oil producers decrease the oil prices with the objective to retain relevance in the global market. These changes have significantly influenced the decreasing gasoline prices.

Projected fall in the Price of Crude Oil

            The consumer's ability to purchase cheap oil is directly influenced by the general drop in the price of crude oil. The fall is attributed to the high supply and low demand for the product. On a daily basis, the United States millions of barrels of oil to supply to the large global oil economy. The slightest decrease in the price of crude oil has a significant effect on the retail price quoted for the gas. From 2013, the price of crude oil has decreased significantly. The projection of the decrease depicts even more relatively low prices by the end of 2015.

            The fall of global prices was also influenced by the decision by OPEC not to manipulate oil prices and oil production (Plumer 1). Previously, the oil body would determine the prices of oil from its producers. The body has in its control the largest producers of global oil. With price manipulation, global oil prices would be significantly affected. Additionally, OPEC would also manipulate oil production thus affecting oil supply. In an instance where the oil supply is low, the prices would increase significantly. Minus the influence of OPEC on oil prices and production, the effect on the retail price of gas significantly reduces.