Gasoline becomes family pay raise

By Jim Killebrew

[January 06, 2015]  I just learned in my home-town of Muskogee, Oklahoma the price of a gallon of gas is only $1.69. The Bakken formation in North Dakota has created enough oil production to raise the states gross domestic product (GDP) per capita to 29% above the national average. This has created a steady flow of oil in the United States that is helping to gain independence from the Oil Cartel of the Middle East and other countries like Venezuela.

The fracking process has become widespread in oil production. Fracking is a process that creates fractures in the rocks and rock formations as water or other fluids are forcefully injected into the cracks in the ground to open the cracks further. Those resulting larger fissures allow more oil to be channeled into the wellbore from the rock formations, this allows the oil to be extracted more easily. This process has opened up hundreds of dormant oil wells across the country. Along with the new discoveries with newer oil fields on private property, it has created an oil boom that has driven the price of oil down even further. Taken together, the deflation of price of oil per barrel by the Middle East Oil Cartel, and the increased production in the United States, the result is the reduction of price for gasoline.
 

It was reported on January 5, 2015 that the price of oil fell below the $50. mark for the first time in five years. Combined with this, Russia and Iraq have increased their production at the lower prices as well. For sure, it has caused the price of gasoline to continue to plunge in price. For the driving American this has resulted in a form of stimulus plan that is allowing the average citizen to have more money in his wallet that he is not paying in higher gas prices. It leaves more cash to spend in other areas of life. There are some negative consequences that are being experienced as well.

With the falling oil prices it has affected the stock market. Since there are so many stocks that are dependent on the price of fuel, we saw the stock market plunge over 300 points on Monday. The Dow fell in relation to the lower price of oil having reached a price of under $50. So even if the citizens who are not participating in the stock market, the losses will eventually have a devastating effect in the long-run. This is especially true with those whose pensions are tied to the rise and fall of the Market.

In the distance we hear the politicians, including the President, claiming some credit for the falling gasoline prices. A claim for the turning of the economy that is increasing employment numbers and lowering the price of gas has been touted. In reality, however, the Administration in Washington has placed a moratorium on oil production on all public lands and off-shore drilling. Additionally, they have virtually waged war against the American coal industry. The President has completely blocked the building of the Key Stone pipeline through a series of "extended studies" to determine the impact on environment. This in the face of hundreds of pipelines that already exist that have not shown an environmental hazard.

Consequently, with all the activity of the oil cost reduction it has caused a raise for every driver in America. Households have been experiencing a fuel bill that rivaled their house payments or grocery bill. So with the reduction of gas prices there has been a breather that has allowed families to keep more of their wages to spend on other things. We need to be prepared, however, to understand it will likely be only a temporary condition. It may be the OPEC producers are in a phase to actually inhibit the production of oil in America.

The truth is, OPEC could continue to keep the prices low for a long time. In that case it will be unprofitable to continue with the fracking production, thereby reducing the amount of oil produced. Keeping the oil prices down has ramifications for the overall economy, not all of which is positive. In the short-fall it is a good thing for consumers; in the long-term it may create a drop in the economy, especially if the prices begin to soar once again. Let's hope the prices are stabilized over time and the political structure changes to allow for the production of fuel and other energy to infuse more, and higher paying, jobs in the economy.

[By JIM KILLEBREW]