Why are oil prices suddenly dropping?
The job market’s not the only thing in the headlines. We’ve also been tracking the oil market. Since the end of September, Brent Crude — the global benchmark — has been sliding, down to the $84-a-barrel range. That’s more than a 10% decline in just over a week.
This is also playing out at the pump, with gas down about eight-cents-a-gallon in the last week.
What gives?
Back in early September, Saudi Arabia and Russia announced they were cutting production to try to boost global oil prices.
And I said this in a story right here on “Marketplace”: “Two of the world’s biggest oil producers signaling tight supply is likely to keep crude prices high for awhile.”
Well, I was right — for about three weeks. Then, I wasn’t anymore.
After global crude prices peaked near $100-a-barrel on September 27th, they started falling, hard.
Cutting supply isn’t working to jack up prices anymore, said Bill Adams at Comerica Bank, because oil demand is dropping all over the world.
“China’s economy’s having a really tough year, that weighs on Chinese energy demand. And Europe’s economy has sort-of been on the cusp of recession since Russia invaded Ukraine and disrupted European energy supplies,” Adams said.
Plus, Adams said U.S. domestic producers have opened the taps.
“One of the dynamics that I think has fueled oil prices moving lower is that production in the U.S. rose 5% or 6% over just a couple of weeks,” Adams said.
Meanwhile, oil demand is also down in the U.S., where people are driving less, pushing gas prices lower, said Andrew Gross at AAA.
“It’s fall, we’re seeing it every year. Gas prices are falling — it’s what they do,” Gross said.
U.S. gas demand is actually at multi-decade lows, maybe because more people are working from home, and driving electric vehicles.
AAA reports the average price of gas has fallen in the last week to $3.74-a-gallon nationwide. And Gross said he wouldn’t be surprised if it fell to $3.30 by Christmas.
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