Oil and gas prices are one of the more regular commodities that are watched by consumers, being that most people drive and fill up their cars, these prices matter to consumers. If you had not noticed already, gasoline prices are down big and this certainly aids retail sales and the consumer. Consumers got another break today when Saudi Arabia announced it will be decreasing prices for the US in December, after increasing oil export prices for Asia and Europe. While Saudis have seen their market share control dive fast in the past several years, the top exporter of oil looks to gain back some US share and put pressure on shale producers. Of course, it was the shale boom that helped US slowly cut imports of oil from Saudi Arabia and the Middle East, in general.
Oil producing countries to take steps to push prices higher
While it is certainly nice for consumers and economic activity to see oil this low, we are seeing some potential steps being taken by oil producing countries that may help push prices higher. OPEC, the Organization of Petroleum Exporting Countries, has a meeting on November 27th and some members are drastically pushing for a cut in production for 2015. However, major members such as Iran, Kuwait and the United Arab Emirates have all expressed the unlikelihood of a production cut at next meeting, saying that 2015 output will largely replicate this year’s plan.
The world’s emerging oil power, the US, is facing its own dilemmas with its oil export ban, which has been in place for 40 years. There is certainly a growing group that is in favor of lifting the ban and having the US enter the world marketplace as a top oil exporter, additionally further limiting the international power of OPEC. I, myself, am a supporter of lifting the ban for the sake of the US economy. Just this morning, before the market open, US released monthly trade balance of -$43 Billion, missing estimates and deficit at a four month high. This absolutely shows that US needs to continue ramping up exports and limiting oil imports, this action alone will have a profound effect on the trade balance, being that we import a lot of oil.
Overall, lower oil means good things for the US economy. Aided by a strong US dollar, and price cuts from Saudi Arabia, oil prices continue to tumble and currently sit around $76 a barrel. December gasoline futures hit a new low today as well at $2.0603, and currently trade at $2.0744. As we enter the holiday season and winter, a traditionally strong seasonal period for oil, lower oil could help boost retail sales for holiday shopping and holiday travel, which could ignite a Santa Claus Rally into end of the year. Bottom line here is that weak oil heading into a strong part of the year for oil is great news for the US economy.