Oil has fallen by nearly half, to the level of recession, the US economy is improving. Why, I know,

The price of oil fell by almost half in just six months, strange and steep plunge that has applause consumers, manufacturers howling and economists wringing his hands about what is good or bad.

Price of a barrel of oil just under $ 56, compared to $ 107 maximum in summer and lower than at any time since the US is still in recession in the spring of 2009.

So what happens? Global imbalances of supply and demand that ripples through the global economy, for better and worse.

MATERIALS GO BOOM

Years of high oil prices, recession interrupted inspired drillers around the world to search the crust for more oil.

They found it.

Since 2008, oil companies in the US, for example, increased production by 70 percent, or 3.5 million barrels of oil per day. To put this in perspective, one by one, that the increase is more than the production of any member of OPEC, except for Saudi Arabia.

As our production increases, unrest in the Middle East and North Africa has reduced supplies from Libya, Iran and other countries. Balance has been achieved: Increased supply from outside OPEC and the restoration of Iraq's oil industry allowed to meet the growing demand worldwide as other materials OPEC waivered.

But now these supplies OPEC looks more confident despite the ongoing tumult, and these materials are not included in OPEC have flooded the market. OPEC estimated last week that the world would need 28900000 barrels of oil a day next year, the lowest in more than a decade. At the same time, OPEC plans to produce 30 million barrels of oil a day next year. This excess of supply over demand sends world prices lower.

DEMAND bankrupt

Global demand will continue to grow next year, but much less than many thought earlier this year. The economy of China, Japan and Western Europe - the main consumers of oil after the United States - all seem to be waning. Oil demand falls when growth stops.

US is still the world's largest consumer, but more economical cars and demographic changes mean demand for oil and gasoline increases. Department of Energy predicts a slight decrease in demand for gasoline in the coming year, although the price is expected to sharply reduced and the economy grow.

Happy Consumers

For drivers, carriers, airlines and other fuel consumers, there is nothing not to like about the decline in oil prices.

The national average price of gasoline has fallen to 81 consecutive days to $ 2.55 per gallon, the lowest level since October 2009, according to AAA. That's $ 1.15 per gallon cheaper than its high for the year, saving American families $ 100 a month as they shop for holiday gifts. "Every time gas prices go down, it's a good thing," said Randy Daniels, 30, who was recently shopping at Lenox Square Mall in Atlanta. "Additional 20 or 30 bucks in your pocket goes away."

Diesel and jet fuel prices also fell, helping to increase profits and share prices of airlines and shippers. Heating oil is the cheapest it has been for four years, lower housing prices just in time for heating for winter in many humid northeast.

Worried economists

The fall in fuel prices act as a tax cut and will boost consumer spending, which in turn is 70 percent of the US economy. But economists are growing concerned that there are other, more troublesome force in the game.

Depth of oil could be a signal that the global economy is struggling even more than economists think. The weak global economy could harm the US economy by reducing exports and employment costs, which together may outweigh the economic benefits of cheaper fuel.

Pain manufacturers

For oil companies, oil producing countries and oil-exporting countries, the collapse of oil prices is painful.

Oil companies usually keep producing oil from wells they have drilled, but lower prices sharply lower revenue and force them to cut costs on new projects for exploration. BP announced last week he would try to trim $ 1 billion in spending next year on the move, which analysts could lead to thousands of job losses.

States that rely on taxes from energy production, such as Alaska, North Dakota, Oklahoma and Texas will see lower income and some of them have already been cut budgets.

Posted in: India News