The price of oil per barrel reached a year and a half low Thursday, Nov. 6, after analysts predicted the country’s poor economic state to be long and trying.
Oil prices have decreased 60% since July, when prices peaked at $147.27 a barrel. On Election Day, prices rose above $70 a barrel, but sharply fell the following day to $60.
Although all of us are enjoying the low gas prices, the decrease is directly related to the current recession. When the economy slows down, the demand for energy declines, and when demand declines, prices also decline.
“The overriding factor is still the gloom in the global economy,” claimed Gerard Rigby, energy analyst in Sydney.
The stock market fell as well Thursday. According to an MSNBC report, when banks cut interest rates, they weaken the national currency, allowing the dollar to gain value. When the dollar strengthens, oil becomes more expensive for buyers dealing in other currencies. In our current economic situation, interest rates are going up, and the value of the dollar is going down. As the value of the dollar goes down, so do oil prices.
Rigby continued, “Oil took sentiment straight from the stock market.”
So, what’s the big deal? Why does it matter why oil is so cheap… shouldn’t we just reap the few benefits of a failing economy? The answer is “no.”
Unfortunately, the decrease in demand for oil has also triggered thoughts about a decrease in production. And guess what happens when production goes down? That’s right, prices go back up. OPEC, the Organization of Petroleum Exporting Countries, claimed that they will cut production by 1.5 million barrels per day beginning this month.Tweet