The price is not right

Analyzing the impacts of lowering gas prices on the United States and the world.

David Black

By David Black

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Over the past six years, gas prices have tended to increase, reaching a U.S. average of $4 per gallon in May of 2011, according to GasBuddy.com. Yet, over the past few months, the price of gas has steadily fallen, landing at a U.S. average of about $2 per gallon. In the Chicago area specifically, prices that have been as high as $4.50 per gallon are now dipping down as low as $2.15 per gallon.

Dennis Duffy, a social studies teacher at Libertyville High School, explained, “The big reason [for the drop] is the fracking revolution of the past year or so.”

Fracking is the hydraulic fracturing of shale to extract oil. In Duffy’s opinion, this has led the country to become “energy independent. It’s been dependent [in past years] on foreign sources of oil, thus we were at the mercy of OPEC’s pricing structure.”

Fracking has a very high break even point. Those companies need a very high [price per barrel] to sell their fuel at to actually operate their businesses.”

— Brian Voss, economics teacher

Prices have also been greatly affected by the increased supply of oil being introduced to the global marketplace by Saudi Arabia. According to The Economist, with this greater supply driving prices down, many economies around the world are being hurt by the lower prices.

Lowering gas prices could cause problems for the gas industry. According to MarketWatch.com, lower gas prices do not provide an economically beneficial marketplace. With lower prices, many companies are cancelling or delaying projects for furthering the gasoline industry in the future because they are not profitable.

Brian Voss, an economics teacher at Libertyville High School, explained, “Fracking has a very high break even point. Those companies need a very high [price per barrel] to sell their fuel at to actually operate their businesses.”

According to Deseret News National, the lowering gas prices have had and will continue to have an effect on the manufacturing industry of the United States. Lower prices could begin to cut off parts of the economy that enable the oil drilling, thus causing an even greater influence on reduction of industrial activity.

On the other hand, the decrease in the price of gasoline has had major beneficial impacts on individual families.

“Let’s say you had a fifteen-gallon tank in your car, and gas is at [about] two dollars, like it is right now…it [only] costs you thirty bucks to fill up your car. That’s absolutely huge when you multiply that by three cars and a family income,” Duffy affirmed.

As Kelly Angelos, an LST counselor, said, “Bottom line, lower gas prices mean more cash in my pocket, so I’m more likely to go out to eat or buy something frivolous for my two little boys.”

As gas prices have decreased, a more positive spirit has entered the citizens of the United States regarding the economy.

Voss explained, saying, “A lot of the economy is self-fulfilling. If you think the economy is going well, and you have a better image of it, we end up doing better.”