Low gas prices relieve consumers

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Damon Ornelas, radio-television-broadcasting sophomore, fuels his vehicle before class Tuesday at the Valero on San Pedro across from campus. “I’m glad the prices are down because it is less of an impact on my wallet,” Ornelas said. “But I’m also curious how they are able to be low. What are we sacrificing?”  Photo by Ryann Palacios

Damon Ornelas, radio-television-broadcasting sophomore, fuels his vehicle before class Tuesday at the Valero on San Pedro across from campus. “I’m glad the prices are down because it is less of an impact on my wallet,” Ornelas said. “But I’m also curious how they are able to be low. What are we sacrificing?” Photo by Ryann Palacios

U.S. fracking causes a glut in the global crude oil market driving prices down.

By Tim Hernandez

sac-ranger@alamo.edu

Students at this college have felt some relief thanks to the downturn of gasoline prices in the last half-year.

As the new semester gets underway, some students voiced their appreciation for the additional funds in their monthly budgets.

Biology sophomore Victoria “Tori” Meza said she could tell she had extra funds at the end of each month.

“I save the excess money in case of an unexpected emergency. I do use some of the savings to buy some treats for my dogs and to occasionally do something relaxing,” she said.

Marketing freshman Megan Alcala, who has a spouse and a 1-year-old daughter, said, “I can tell we have money left and I usually spend it to buy more groceries for the household.”

Kinesiology freshman Patrick Elizondo said he feels a little freer in his spending. “I go out to eat or perhaps buy some more clothes. Before I had to be more careful with spending.”

Civil engineering sophomore Alex Zavala said, “I notice I’m saving more on gas. It’s helpful, especially now with school starting. It helps pay for books. I feel like I don’t have to stretch my dollar as much as I used to.”

Several factors have caused the price of gasoline to drop to $1.58 a gallon within the last six months.

Political science Professor Suzanne Martinez said, “One factor is national and state policy has helped to bring about reduced gasoline prices and this helps consumers across social economic lines.”

She referred to the lifting of government restrictions on the use of hydraulic fracturing, or fracking, by the American oil and gas industry and its impact on the crude oil global market.

Additional crude oil, which was previously unavailable on the market, created a glut on the global market driving the price of a barrel of crude down from about $48 per barrel in late July 2015 to about $28 on Jan. 20, 2016.

During the fracking process, a drilling rig is used to drill down into the ground and then a high-pressure mixture of water, sand and chemicals is injected into shale rock formations.

This process fractures the shale rock causing it to release natural gas and crude oil contained within the rock.

Fracking is far less expensive than deep well drilling operations, which attracted investors and almost overnight the race was on for natural gas and crude from these new operations to market to show a profit as quickly as possible.

In April 2011, a barrel of crude sold for $113.57.

By mid-February 2014, the average price dropped to $109.59 and, by late July, the price dropped even further to $101.63.

But the true impact would not be felt until 2015.

By mid-March the price of crude oil had dropped to about $42 per barrel.

In early May, the price of crude was $61.83 per barrel, most likely because of speculation regarding summer travel, but the comeback didn’t last past the end of the month and the price of oil began to drop further.

By late August, the price was $38.44 per barrel. In early to mid-October the price of crude had risen back up to almost $50 per barrel, again most likely driven by speculation regarding travel during the holiday season, but the price of gasoline at the pump continued to fall to $1.92 per gallon, down from $2.04 at the beginning of the month.

On Jan. 22, the city wide average for a gallon of gasoline in San Antonio was $1.61, a significant decrease of 96 cents, or 37.4 percent, from the $2.57 average price per gallon for June 2015.

2015 also saw the lifting of economic sanctions against Iran that have been in place since the Carter administration during the late 1970s.

A great amount of speculation has been voiced surrounding the impact that Iran, now free to participate in the global crude oil market, will have on crude oil prices in the near future.

Many pundits fear that this latest change in the global landscape will only serve to drive the price of crude oil to all time-lows and will impact the stability of the stock market.

Not all experts share the same fear regarding the possibility of further crude oil price drops in the near future because of Iran’s re-entry into the global market.

“If we’re not depending as much on Middle East oil, then that can be a positive for the U.S.,” Martinez said. “It provides the U.S. a little more leverage if we are free from political restraints associated with national interest based on business markets.”

Economics Professor Cyril Morong said some people are saving the money against the future because they might be unsure about the permanence of the reduced gas prices.

“Iran will have an impact,” Morong said. “Any slight increase in supply means a big drop in price. The extra oil from Iran is an example of that.”

The New York Times international business reporters Clifford Krauss and Stanley Reed reported on Jan. 18 that the prospect of Iranian oil entering the global market caused the price of a barrel of oil to drop further below $30 per barrel.

The oil and gas industry has cited dropping crude oil prices for layoffs and more are expected in 2016, Nathan Bomey of USA TODAY wrote Dec. 31.

How much the average consumer concerns themselves with these issues may vary, but Professor Thomas E. Billimek, chair of psychology and sociology, said, “Most people are probably happy that prices have come down so much. I can’t imagine that people would be upset about oil companies making less money.”

“I don’t know if the general population has a real concern about these types of things. In a lot of ways, we are insulated from those things unless we are directly impacted by them,” he said.

All price data was sourced from: http://kpho.membercenter.worldnow.com/category/213277/historical-price-charts-feed

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